An annual salary increase should be tied to profitability not the calendar. We don't recommend automatic annual salary increases. When learning how to manage payroll, we do wholeheartedly recommend is a salary plan that is fair and rewarding to all employees that inspires them to go above and beyond for the agency and its clients. You don't reward someone with an annual salary increase just for being on staff or holding down their position for another year. You reward them for their contributions and their added value.  Unfortunately, many employees feel entitled to a salary increase every year, and are very vocal when they don't get one. Somehow, salary has become an entitlement program. "The longer I stay, the more I should be paid." Sorry, I don't buy it. My concept of a good salary/compensation plan for advertising agencies  includes four basic elements: Profitability of the agency The responsibilities of the person's job and their contributions to the profitability Did they get better at their craft (are they adding new value) How long have they been a part of the team It boils down to rewarding the results you want. Rewarding the Results Profitability has to come first. You can't increase salaries if you aren't making a profit. The first responsibility of every employee should be to help the agency make a profit. I believe it is the agency's responsibility to keep employees even with the cost of living, and that employees should receive a piece of the profits the agency earns. The agency made the profit because of the combined efforts of the staff. Responsibilities vary with the position and with the person. It's obvious that a senior art director will make more than [...]