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on February 9, 2021 Employee Engagement Total Rewards Statements

Add Total Compensation Statements to Your Annual Merit Increase Plan

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A good employer understands the importance of regularly rewarding employees for their hard work. Having an annual merit increase plan in place keeps you on track with employee raises. It informs both employers and employees when to give a pay increase and by how much. Periodic pay raises and bonuses can set your company apart from others by building loyalty and retaining top talent. 

Establishing an annual merit increase plan can help foster a positive work environment by increasing motivation and morale. That being said, it’s not enough to just have an annual merit increase plan — it’s important to ensure it gets distributed to all of your employees. A suitable method for creating a context for raises is sending out both the total compensation statement and annual merit increase simultaneously as a total rewards statement. However, what exactly is the purpose of the annual merit increase plan?

Learn More: backstitch Digital Total Compensation Solution

An annual merit increase plan outlines an employer’s maximum salary increases for the year. It provides information on raises and motivate workers to achieve their work objectives. It will also reassure employees that they are being rewarded fairly for their hard work and dedication. Including a total compensation statement with your annual merit increase plan drives open communication between employer and employee, provides compensation transparency and holds employers accountable.

Why Have An Annual Merit Increase Plan_ (1)


Delivering as much information as possible to employees fosters positive and open communication in the workplace.  Including total rewards statements within the annual merit increase plan will demonstrate to employees that you strive towards balancing motivation and retention at your company. Providing thorough updates gives your employees proper context and shows them that you value open communication as an employer.


Combining both a total compensation plan with an annual merit increase plan improves transparency in your business operations. Employees will have difficulty challenging any of the information conveyed if all the details are laid out in front of them. Providing two valuable documents as a comparison shows that your company is committed to promoting truth and loyalty. Every employee deserves to know the factors that impact how you calculate pay increases. 


Assessing a total compensation plan with an annual merit increase plan will help hold employers accountable. If something doesn’t add up, it will become evident by examining both documents together. This encourages an employer to stand by their word. Otherwise, an employer sends the wrong message if they fail to followthrough in the annual merit increase. 

Implement the right technology to generate a comprehensive total compensation statement that can be sent out with your annual merit increase plan. The administrative burden of distributing annual documents can be lightened with useful software. 

backstitch is an employee communications platform that easily integrates your business analytics to create and distribute total compensation statements. With this, human resources departments can deliver the most relevant compensation information to employers and employees. 

Learn More About Our Total Compensation Software Package

Patrick Fields

Sales Executive

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