Have you heard of giving employees a “longevity increase”?
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While most of us are familiar with the ideas of raises, bonuses, and incentives, a longevity increase is not one that is in everyone’s vocabulary. In essence, a longevity increase is a raise given to an employee simply to recognize and reward their time with the company. This raise could be given every year after a certain number of years of employment, or it could be given at special, predefined milestones. It is up to the company to decide.
Why Give Longevity Increases?
While there’s nothing mandating that an employer takes years of service into account in employee raises, there are several arguments for doing so:
- It can help keep long-term employees at market rates, which can maintain their satisfaction with their pay level.
- It can be a way to show appreciation to employees who have stayed with the company for an extended period of time.
- It can be a recruiting tool, emphasizing that employees are rewarded for their loyalty. This can help to attract new hires.
- It can be a way to improve retention, thus keeping the most experienced employees onboard.
- It can incentivize employees to continue good work in order to maintain high rankings.
Businesses often opt to implement longevity increases for significant length of service milestones, but the starting point—i.e., what length of service is considered significant—will vary based on the circumstances.
Frequently, if a company offers a longevity increase, the increase is repeated (or even increased by a higher percentage) for even longer milestones. Here’s an example to illustrate the situation: Company A gives longevity increases of 2% of salary after 10 years, and then additional longevity increases of 3% after 15 years, and 5% after 20 years. These raises could be in addition to any merit-based raises accrued during that time; how the increase is implemented is up to each organization.
Arguments Against Longevity Raises
Despite everything we just described, there are also several arguments against giving raises that award longevity with the organization. Here are some of the arguments against awarding longevity raises.
- If the company has kept up with market rates, there’s no need to use longevity as an excuse to raise salaries of long-term employees to market levels.
- This is an extra cost that some deem unnecessary because it’s not merit-based and may be rewarding individuals who are no longer performing well.
- Some argue that it makes more sense to solely reward performance. If the longevity raises take money away from raises that could more directly impact productivity, it can be questioned whether it is money well spent. (If it is implemented in conjunction with performance-based rewards, however, this argument may not have as much weight.)
- There are other ways to reward long-term employees, such as increased vacation time or other benefits and perks—and many of these will cost the company less money.
If you do opt to implement longevity increases, be sure to do so fairly and consistently to ensure that the program does not become a source of frustration or fuel for claims of discrimination. And be aware that taking away a formal program of longevity raises in the future may alienate employees who were counting on it.
Does your organization give longevity increases? Why or why not?
*This article does not constitute legal advice. Always consult legal counsel with specific questions.
About Bridget Miller:
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.