Unfortunately, merit pay raises may not motivate employees to work harder. This is because employees’ pay for performance expectations can interfere with the value of getting a raise. If employees have too high of an expectation that they will get a pay raise, then they may feel let down if their pay raise seems too low. Additionally, if employees feel deceived about expected pay raises, then they can seriously lower their performance levels in response. Today’s best managers help set employee expectations for pay raises so that employees won’t have overly high or overly low raise expectations.
Source: Schaubroeck, J., Shaw, J. D., Duffy, M. K., & Mitra, A. 2008. An under-met and over-met expectations model of employee reactions to merit raises. Journal of Applied Psychology, 93, 424-434.
