What to do when your employee asks for a raise

A raise request can be an uncomfortable issue for any employer to address – especially when caught off-guard.

It can be tempting to simply brush away the request; however it’s important to remember that how you decide to answer the question can have long-lasting consequences on employee satisfaction, performance and of course, your budget.

Understandably so, a raise request can create stress and tension between staff and management – it can be difficult to handle without hurting the feelings of the employee or your bottom line. In this situation, fairness is the key and giving your employee a chance to discuss their request before you make a decision is part of the way forward.

Here are my steps for handling a raise request in a way that will keep everyone satisfied:

1. Hear them out

There are a multitude of reasons given for raise requests, ranging from high performance, changes to the job scope, underpayments and cost-of-living increases. Set aside some time for a formal meeting with the employee and ask them to briefly explain their reasoning behind requesting the raise. Any information given that they think would influence your decision will also assist you in researching whether a raise would be justified.

2. Evaluate the request

Fairly assess the situation and do some research of your own – consult salary surveys for the industry, both nationally and regionally. Salaries can vary significantly across one position over different regions and even within the same industry, so it’s important to consider all factors when reading a salary survey.

You’ll want to compare apples with apples, so work out what the listed amount includes. Is it just the base salary, or are superannuation and incentives included? It’s also useful to consider whether the scope of the role is different to the one in your business. If you can, reach out to your networks to find out what other salary packages in the industry look like.

After looking at the market, you can now evaluate the request in terms of their performance. Consider their contribution to your business and how well they perform compared to other staff.

3. Make your decision

After you’ve compiled your research, your decision will be much easier. The amount of money that an individual is paid is usually a combination of two things: the value of the job itself and the performance of the person. There are three primary reasons for turning down a salary increase:

  • Valid salary research shows that the current compensation is in line with the market
  • The employee’s current performance doesn’t warrant a raise
  • The value of the role to the business has already been reached

If a review of the individual’s request shows you that a pay rise is appropriate – the person is underpaid compared to others in the company/industry doing similar work, or it would be difficult to replace the employee at the current salary, it’s time to think about your next move.

4. Inform the employee of your decision

If your findings show that a pay rise is not appropriate at this point in time, you need to be prepared to have a conversation with your employee to inform them of your decision and answer any questions they may have. Difficult conversations are never easy but if you’ve done your research, you’ll be able to back up your decision with concrete examples. You should also make clear if the employee’s performance doesn’t merit a pay increase and what would be expected of them to justify one – “I’d love to pay you $X but you would need to currently be doing [explain tasks].”

While the employee might not be happy with the salary outcome, they will walk away with a better understanding of your business’ pay policy, where they stand, and how they can reach the next level.

About the Author

Paula Maidens is Managing Director of Recruitment Coach, a unique HR coaching and consulting firm for small-medium businesses.

Image: YouTube

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