Merit pay increases create a cost burden to employers because these increases carry over to...
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Merit pay increases create a cost burden to employers because these increases carry over to base pay each year. At the end of 2015, Anne Brown earned $50,000 per year as a systems analyst and John Williams earned $35,000 per year as an administrative assistant. Each received a 5 percent pay increase every year until the year 2020.
Anne Brown ($) John Williams ($)
2016 $52,500 $36,750
2017 $55,125 $38,587
2018 $57,881 $40,516
2019 $60,775 $42,542
2020 $63,814 $44,669
Under a merit pay system scenario, lets assume the goal is to provide Anne and John with the same annual pay increases as measured in dollars, just for 2016. It has been determined that Annes annual increase rate will be 5%. What should the rate be for John? What will Anne and Johns new salaries be at the end of 2016?
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