GE may lead way in replacing raises with other rewards

General Electric, often seen as a management trend-setter, is considering whether to replace annual raises with other forms of reward. GE may also abandon its five-point rating scale for staff. Many US companies are already seeking to offer benefits that may be more appealing to employees than pay, such as parental leave, paid leave and new performance measures. Netflix last year committed to allowing employees to take a year’s childcare leave, whilst Adobe offered six months. Goldman Sachs, Microsoft and GE are already reviewing performance systems. Meanwhile Morgan Stanley announced last week that it will change employee assessment measures.  

General Electric is the laboratory of corporate management. So when the US manufacturing giant says it's rethinking a bedrock tradition of corporate life - the annual raise - you can bet that C-suites around the world will be watching closely.

GE executives are reviewing whether annual updates to compensation are the best response to the achievements and needs of employees. The company may also scrap the longstanding and much-imitated system of rating staff on a five-point scale. Decisions on both issues may come within the next several months, spokeswoman Valerie Van den Keybus said.

Touching sacred cows: Jeff Immelt, the chief executive of General Electric. Credit: Brendon Thorne

"We uncovered an opportunity to improve the way we reward people for their contributions," said Janice Semper, GE's head of executive development, in an e-mailed response to questions. She said it will involve "being flexible and re-thinking how we define rewards, acknowledging that employees and managers are already thinking beyond annual compensation in this space."

In the upper reaches of the US labour market, a broader shift in benefits is already under way. Businesses are competing over younger workers for whom other perks may be as important as pay, and senior employees looking for more flexibility as they near retirement. To lure and retain talent, they're ready to reconsider everything from parental leave and paid time off to when and how performance is rated.