Organizations use a variety of tools to manage employee compensation and ensure that pay remains fair and competitive. Organizations utilize a specialized adjustment known as a targeted raise. This mechanism allows a company to make focused pay increases outside of the regular review cycle, addressing specific needs within the workforce or the broader labor market. Understanding how and when these adjustments are applied provides insight into a company’s overall compensation strategy.
Defining Targeted Raises
A targeted raise is a discretionary compensation adjustment granted to a narrow group of employees, rather than being applied broadly across the entire organization or department. The increase is “targeted,” meaning it is based on specific, measurable criteria that an employee meets. Unlike universal pay increases, these adjustments are not distributed based on a general budget for raises.
These raises are often initiated by the human resources or compensation department after an analysis reveals a disparity in pay. The funding for a targeted raise is typically drawn from a separate compensation budget pool, distinct from the one used for general merit or cost-of-living adjustments. This approach ensures that the organization can be agile in responding to immediate compensation pressures without disrupting the standard annual review process.
Common Applications and Triggers
Retention and Counteroffers
One of the most frequent reasons a company issues a targeted raise is for employee retention, especially when a high-performing individual receives a competitive job offer. The targeted raise acts as a counteroffer, providing an immediate pay increase to secure the employee’s continued service. Positions experiencing high voluntary separation rates are often the focus of targeted pay adjustments designed to improve retention.
Market Adjustment and Pay Compression
Targeted raises are also a direct response to issues of market adjustment and pay compression, which occur when an employee’s current salary lags behind the external market rate for their role. If a company’s internal salary data shows that a specific job function is paid less than the industry average, a targeted adjustment is applied to bring those salaries up to a competitive level. This proactive measure ensures the company remains competitive in the talent market, helping to attract new hires.
Internal Equity
Addressing internal equity is another trigger for this type of adjustment. Internal equity discrepancies arise when employees with similar experience, performance levels, and responsibilities are paid substantially different amounts within the same organization. A targeted raise allows the company to close these internal pay gaps, often identified through an internal audit, ensuring that compensation is aligned based on job value and performance.
Targeted Raises vs. Standard Compensation Adjustments
Targeted raises differ from other common forms of pay increases, primarily in timing and criteria. Standard annual merit increases are linked to an employee’s performance rating over the preceding review cycle and are processed once a year on a scheduled date. Targeted raises are issued off-cycle, meaning they can happen at any time as immediate needs arise, such as responding to a competing job offer.
Cost-of-Living Adjustments (COLAs) are applied across-the-board to all employees to maintain purchasing power against inflation; they are not tied to individual performance or market data. A targeted raise is not the same as a promotional raise, which is tied to a change in title, level, and increased job responsibilities. A targeted raise is purely a monetary adjustment within the employee’s existing role, becoming a permanent part of their base salary.