A raise is an increase in the amount of hourly pay or salary that an employee receives for work performed in an organization. Organizations provide raises for employees in a number of different ways and for a variety of reasons. A raise is considered a positive event because it increases the employee's take home pay.
- Some organizations assign raises based on an employee's review in an annual performance appraisal. This type of raise is often assigned based on an employee's performance ranking on the review (1-5, for example, with a percentage of pay increase assigned to each numeric rating).
- Other organizations distribute raises, such as a 2.5% cost of living raise, equally to all employees either annually or bi-annually.
- A raise can be required by a contract, such as in union represented workplaces. It is generally negotiated and clear cut, based on the compensation system negotiated.
- Government and other nonprofit organizations may have raise requirements that are clearly spelled out for all employees and based on employee longevity, organizational pay grades, and job requirements and responsibilities within the pay range.
- A raise can reward an employee's contributions. It can also be a result of an employee's successful salary negotiation.
- Some organizations attempt to assign a raise to each employee based on the employee's performance and contribution during the time period covered. This form of merit increase or merit raise is increasingly important in the private sector.
An employee, particularly in the private sector, can request a raise when the employee believes that his or her work contributions merits an increase in pay. A raise also generally accompanies an employment event such as a promotion, lateral move, special assignment, or team leadership role, to cite several examples of job changes / enhancements that trigger a raise.