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Merit pay increases create a cost burden to employers because these increases carry over to...

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Finance

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

Lets assume that both employees have reached the maximum pay rates for their jobs in 2015. Under a longevity pay system, calculate the annual longevity payments for each employee for years 2016 through 2020.

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