Question

Under a merit pay system, calculate Anna Brown’s salary is listed at the end of 2015 was $50,000 and John Williams’ was $35,000

10. Under a merit pay system scenario, let’s assume that goal is to provide Anne and John with the same annual pay increases as measured in dollars, just for 2016. It’s been determined that Anne’s annual increases rate will be 5 percent. What should the rate be for John? After applying the increase amounts, what will Anne’s and John’s new salaries be at the end of 2016?

Answer 1

Anne annual salary increase = $50,000 * 5% = $2,500

It has been given that the goal is to provide Anne & John with the same annual pay increases as measured in $, just for 2016. Considering this, the annual pay increase for John would also be $2,500. In order to compute the annual increment rate for John, divide the annual pay increase by the salaries at the end of 2015, i.e. (2,500/35,000)*100 = 7.14%. The new salaries of Anne & John at the end of 2016 is shown below-

Anne = 50,000 + 2,500 = $52,500

John = 35,000 + 2,500 = $37,500