An annual merit increase is a raise in an employee’s salary based on their performance over the past year. This type of increase is typically awarded to employees who have met or exceeded their performance goals and is intended to reward and motivate employees for their hard work and contributions to the organization. Merit increases are usually a percentage of the employee’s current salary and are added to their base pay.
The formula to calculate the new salary after a merit increase is:
\[ S_{new} = S_{current} \times \left(1 + \frac{M}{100}\right) \]
Where:
Let's assume the following values:
Using the formula:
\[ S_{new} = 50000 \times \left(1 + \frac{5}{100}\right) = 50000 \times 1.05 = 52500 \]
The new salary is $52,500.
