How an Aggregate Salary Increase works

A number of GSU’s collective agreements refer to aggregate salary increases and recently a number of GSU members have inquired how this approach works. The aggregate increase approach means that the payroll of an employer will increase by an agreed upon minimum amount  (usually expressed as a percentage), but the individual employees’ salary increases may be higher or lower than the aggregate percentage increase.

The following example illustrates how the aggregate approach works. 

  1. Let’s assume the payroll is $1,000 and the company proposes to pay an aggregate salary increase of 2.5%.
  2. The result would be a 2.5% increase to the payroll or $25.
  3. There are two employees. Employee A whose salary is $600 and employee B whose salary is $400.
  4. If both employees received a salary increase of 2.5%, Employee A would get $15 and Employee B would get $10. The payroll would rise by 2.5% or $25.
  5. But, if the company decided that Employee A should receive a 3% salary increase, her/his salary would rise by $18 leaving $7 for employee B (an increase for her/him of 1.75%).
  6. On the other hand, if Employee B was given a 3% salary increase, her/his salary would rise by $12 leaving $13 for Employee A (an increase for her/him of 2.167%).
  7. In any of the above scenarios the aggregate increase to the payroll is 2.5% or $25. However the individual shares will vary.

 As an alternative, GSU has proposed to employers using the aggregate approach to annual salary increases that there should be a guaranteed increase for every employee at least equal to the rise in the consumer price index, 2% for example.

The following example illustrates how GSU’s approach would work. 

  1. The payroll is still $1,000. Employee A’s salary is $600 and Employee B’s salary is $400. The aggregate salary increase would still be 2.5% ($25), but every employee in this example would be guaranteed a salary increase of at least 2%.
  2. Therefore, Employee A would receive a guaranteed salary increase of $12 (600 x 2.0%) and Employee B would receive a salary increase of $8 ($400 x 2.0%). There would still be $5 left to distribute since the aggregate salary increase has to be 2.5% ($25).
  3. The additional $5 could be divided equally between the two employees, or by some other proportion or the entire amount could be given to one employee or the other. Whatever division of the $5 occurs in this example the aggregate payroll still rises by 2.5%.