End of year is coming up. Let’s talk about raises.

Is there a right way to do it?
What’s the best way to do it?
How much should I give or how often?

So rather than answer them again and again every time I get a new email about it, I’m going to answer all of your questions below.

1. When should you start giving a raise?

It depends.

With my team, we usually start giving raises when they’ve been with us for a year.

Sometimes, we give raises sooner if they’re really good.

Some give raises once they start making more money, this is usually the case for small businesses that are just starting out. Just be honest and let them know that they’ll be getting a raise once your business starts making more money.

Typically, if we hired someone in October – December, we’re probably not going to give a raise in January.

Others do it annually (like us).

Some do it at random times (this is how I did it when I started out).

2. How much of a salary increase should you give?

Again, this would depend on how much you want to give, how much you can afford, and the performance of your OFS.

In our case, most of our OFS team work full-time. They usually get around $25 to $75 increase in their monthly income every year. That’s around $0.14 to $0.45 increase in their hourly rate, depending on performance.

Once, I gave one of my OFS a $150 raise in her monthly salary (an additional $0.90 to her hourly rate) because she was doing so much good work that year.

When determining how much increase you should give, consider that your OFS will likely work for you for a lot of years and you’ll want to continue giving raises.

3. How often should you give a salary?

Some do it annually (like us). This is a pretty standard practice. We’ve found yearly salary increases keeps them motivated and loyal.

Some do it at random times (this is how I did it when I started out).
Once I gave one of my OFS a big raise halfway through the year because he was doing really well, and his work really improved our business.

If you’re giving your OFS a raise once a year, I suggest doing it at the start of every year. Just makes it easier for your accountant. Starting a salary increase every January also makes it easier for you if you give your Filipino workers 13th month or benefits.

4. Would a raise affect their 13th month?

I just want to remind you guys that the 13th month is optional. It’s great if you can give it to your OFS but if you can’t afford it yet, you can skip this question.

If you’re giving your OFS 13th month benefits, then yes, a raise will affect that.

Let me give you an example.

Let’s say I was paying my OFS $500 a month for full-time work last year. So the 13th month she received last year was also $500.

This year, I gave her a $50 raise. So now, she’s receiving $550 as her monthly salary. This means I’ll also have to increase her 13th month to $550.

If you gave a raise during the year, just add up the total salary you paid them through the year and divide by 12. That’s the 13th month amount.

More to come on the 13th month in my next email.

5. Would a raise affect their Philhealth, SSS, Pag-IBIG or health insurance?

These benefits are also optional. If you’re not paying benefits for your OFS, you can skip this question too.

For health insurance, no. Those prices are not determined by their salaries.

Also no for Pag-IBIG. Most pay the required minimum of P200.

For Philhealth and SSS, yes, but not by much.

For PhilHealth, it’s going to be 5% of their salary. It was 4% for 2023 but the increase to 5% will push through starting January 2024.

For SSS, it’s 13% of their salary.

If you want to have an idea of how much it’s going to cost, here’s how you can compute for it: https://johnjonas.com/whats-the-ballpark-cost-for-ofs-benefits/

6. Should you guarantee/promise to give your OFS a raise?

This is all up to you.

Some people put it in their contracts, guaranteeing that their workers would get a raise every year.

Some offer raises depending on how well the business is doing for the year. Like if they’re doing well, everyone gets a salary bump.

In my case, my team knows they will get a raise every year, but they just don’t know how much. All they know is that the amount they’ll get will depend on their performance.
I don’t do performance reviews.  I know how well they’re doing. They know how well they’re doing.

7. I really can’t afford to give my OFS a raise this year. Is that okay?

It’s perfectly fine not to give a raise. Just be honest with your OFS that you can’t afford it right now. As long as you pay them well, you treat them well, and you do give raises when you can afford it (and they deserve it), it shouldn’t be an issue.

Hiring and keeping a great OFS isn’t just about money. They’ll stay with you if you’re a good boss who’s fair and treats them well.

If you want to read about how other people give their OFS team raises and any questions they might have, you can read my blog posts below:
https://johnjonas.com/how-much-of-a-raise-should-you-give-your-ofs/
https://johnjonas.com/how-to-calculate-reasonable-pay-rises-for-your-ofs/
https://johnjonas.com/how-do-pay-raises-work-with-ofs/
https://johnjonas.com/how-maximilian-handles-pay-raises-with-his-ofs/

John