One of your employees has asked for a pay rise and it’s up to you to respond. But how do you make the right decision?
Salary negotiations and pay rise requests aren’t always straightforward conversations. Often managers alone cannot come to the conclusion of whether or not to grant a pay rise request and will have to involve other stakeholders and departments.
Here’s how you can navigate this sensitive situation to help you achieve an outcome that will satisfy all parties involved: yourself, the employee and the business.
1. Stay professional and ask for more information
When the pay rise request comes through, it is ok to pause and ask for more information. Saying ‘You definitely deserve a pay rise’ and ‘We can’t give you a pay rise’ are both equally wrong at this stage.
While it may be tempting to give an answer straight away, at this early point in the process of handling a salary raise it’s best to stay calm and act professional.
Instead of jumping to solutions, ask questions. Give them a chance to explain why they think they deserve a pay rise and write it all down. This will show them that you are taking the matter seriously.
It can be an uncomfortable topic for a lot of people, so you want to acknowledge their courage to address this with you. Keep in mind, they are asking you this because they would like to stay with the company and so this is a great chance to improve your employee retention.
Finally, let them know when they can expect to have an answer and that you will carefully consider the request before making your decision.
2. Compare market salaries
After the first conversation, it’s up to you to evaluate their request. Are they paid fairly compared to other people performing the same or similar duties? How important is this person to you, your team and the company’s success? Does their current experience justify a move into the next salary bracket?
Using our Salary Guide Calculator, you can check whether their current salary is in line with market and industry trends. You can also compare how salaries change depending on location, industry, sector and experience levels.
Once you have identified the market average salary, you also need to identify the risks of not giving them a pay rise.
At the same time, you want to evaluate whether the request is based on long-term efforts (someone who is always going that extra mile) or has it arisen purely because they feel they should be paid more without being able to provide solid rationale as to why.
3. Share decision making
After you’ve had your initial conversation and have conducted market salary research, the next step would be to speak to HR or your direct manager. Your HR department is well practiced at handling pay rise requests, which means you are asking the right people to support you with this decision.
When it comes to involving other people though, you just need to be aware that it will be easier for them to deny a pay rise request simply because they don’t work with the person as closely as you do and as a result they won’t be able to see the same level of value this person brings to the company.
Be prepared to provide convincing arguments if you don’t want to lose a valuable employee. Think outside the box. Can budget be re-allocated between projects to allow for this person’s pay rise for example?
4. Deliver the news
Regardless of the outcome, explain how you came to your decision (comparing market salaries, speaking to HR, moving around budget etc.).
If the news does not give your team member their desired outcome, talk to the person about setting tangible goals that can be reviewed in the near future. Sometimes, despite your best efforts, you have to deny a pay rise to your best performer simply due to budget restraints. To ensure they stay motivated and feel appreciated, put some time in your diary to organise a follow up and review their pay rise request. Remember, they want to stay which is why they’ve asked you instead of simply applying for a new job. If you forget to follow up on their request in a timely manner, you might find yourself having to look for a new employee.
If the news is good, it’s just as important to explain the steps involved in coming to that conclusion. This is because you want to communicate that pay rise requests are taken seriously and employees don’t receive a pay increase simply by asking.
Alternatives to offering a pay rise
There are many ways of retaining employees, even if you can’t offer a pay rise at this stage. Speak to the person to better understand what attracted them to the company in the first place and how they would like to progress in their career. This will help you identify which benefits will help keep them at your business.
This could be introducing more flexible hours, adding extra annual leave days or offering professional development opportunities.
Preparation is key even when it comes to handling salary raise requests. Set up a plan for regular performance reviews and map out a plan with your employees how they can progress in their career.
As their manager, you are assessing your employee’s performance on an ongoing basis and there’s hardly anything as motivating as receiving a promotion or a pay rise from your manager, even without having to ask for one.
This being said, not everyone will feel confident or comfortable enough to ask you for a pay rise. Listen out for less direct requests too. They can come in the form of an employee telling you about their achievements or how they’ve been addressed by a recruiter. According to the Harvard Business Review studies, women especially are often less likely to ask for a pay rise, so keep communication open and be transparent about your employee’s career development opportunities.