Deferred Merit Increases

Deferred Merit Increases

On rare occasions, an employee's annual merit increase may be deferred for performance or other reasons. In all cases of deferred merit, a formal annual review should still take place with the employee.

Keep in Mind

Before beginning the Annual Salary Review (ASR), the department should work with their Human Resources Officer and departmental senior administrator on any performance improvement plan(s) and/or possible deferred increase(s).

  • A department head or manager may choose to defer an employee's merit increase for three to six months if he/she believes that the employee's performance can improve within that time period.
  • The deferral should not be the first indication to an employee that a performance problem exists.
  • An employee's performance during the deferral should be documented.

Next Steps

If a merit increase is deferred due to performance:

  • The department should notify their Human Resources Officer who will work with the Compensation Office to implement the deferral.
  • Contact your Human Resources Officer who will advise on the next steps if performance improves at the end of the three to six-month deferral period.
  • The increase would be determined by the merit guidelines in effect at the time of the deferral.
  • Funds for the (prorated) increase will be held in the Budget Office to be distributed when the raise becomes effective.
  • Contact the Human Resources Officer so an appropriate action plan can be identified. If performance does not improve during the deferral period, the employee will not be eligible for a merit increase.

When a Deferred Increase for Performance is Recommended

  • An employee's performance may be marginal and does not fully meet minimal requirements for the position and/or falls below performance standards.
  • A deferred merit increase is generally recommended for times when:
    • The employee has a good work history.
    • You believe the performance problem may be temporary.
    • The employee understands that receiving a merit increase at the end of the deferral period is contingent on fully meeting the expectations of the position.
    • A performance improvement plan is in place.

Effect on the Annual Performance Review Date

  • The employee's annual performance review date would remain unchanged. Any merit increase received would be for the remaining six to nine months until the next regular review date.
    • Example: An employee's review date is July 1, but a merit increase is deferred for three months (until October 1). On or before July 1, a performance improvement plan is established and discussed with the employee.
    • If performance improves, the merit increase will become effective October 1, and the employee will receive 9/12th of the expected increase (for October through June). His/her next review date will be July 1 of the following year.

Deferrals for Non-Performance Reasons

At times, the merit increase must be deferred for non performance-related reasons, e.g., when the time frame for preparing the annual performance review must be extended. For example:

  • A grant award may be pending and the availability of funds is unknown; however, the DLC expects to receive notification shortly.
  • The employee's department head or manager is unavailable because he/she is unexpectedly called out of the country or placed on a new assignment for a brief time period.
  • The process of review involves several parties and will extend slightly beyond the ASR due date.
  • The employee has only been in the position for a short time despite being eligible for review, and the department head or manager is not yet comfortable reviewing the employee's performance.