Show me the money! How to respond to an employee’s request for a pay rise

ShowTheMoney

You may not have had an employee brash enough to use the well-known phrase uttered by Cuba Gooding Jr’s character in Jerry Maguire. But if you work in management, or are a business owner, you have no doubt been approached with a request for a pay rise.

This can be a stressful situation, especially if you are without a dedicated HR department to offer support.

What’s more, with Ai Group’s Salary & Benefits Survey 2016  finding businesses are applying an average salary increase of only 2.7% this year (the lowest recorded result since the Salary & Benefits Survey Report was first produced in 2012), it’s likely that even more employees will be knocking on your door.

An employee’s perception that they are not being paid what they’re worth may be justified, or it may not be. Perhaps they’ve taken on more work; they might be looking towards greener pastures elsewhere; or maybe they just heard that ‘Barry’ (who works in finance) just got a raise.

Regardless, the way you react to a request for a pay rise can have significant consequences for employee engagement, retention and productivity. So how should you respond?

Listen

Employees may once have feared retribution for asking about their pay. While those days are probably long gone, it still takes courage to ask for a pay rise. As such, try to be conscious of how the employee feels and empathise with their situation.

In many instances the employee may also be contemplating leaving, so by approaching you with their issues they are giving the organisation the opportunity to retain their services.

Before answering your employee’s request for a raise (especially if leaning towards a ‘no’) it is good practice to understand their reasons and to not react too quickly. Let the employee speak and actively listen to what they have to say.

Do not feel pressured into thinking you have to give them an answer there and then. Thank the employee for bringing the matter to the attention of the business and let them know that you will get back within a reasonable time frame. Ideally, try to set a specific date.

Gather information

Try and get as much information from the employee as possible. What is driving their thoughts? Why do they feel they deserve a raise? Do they believe they are not fairly compensated for the work that they perform? Are similar jobs in the market paying more?

Having all of the relevant information makes it easier to make an objective and informed decision and one that the employee will have a greater chance of respecting. You may even consider introducing a template for employees to complete before approaching the organisation for a pay rise.

If remuneration policy and practices exist, ask an employee if they are familiar with them. Often, grievances or requests for greater compensation are driven by a misunderstanding of how a policy is applied, and it may be worthwhile to direct them to what is already in place.

Look out for employees that drop hints

Not everyone can approach their employer about a salary increase. Some employees may approach the subject indirectly by mentioning what salary similar positions receive elsewhere or even by mentioning roles that are being advertised. Such hints should not be ignored as they may very well be signs the employee is contemplating leaving.

Consider the request

Give due consideration to an employee’s request for a pay rise and avoid being flippant. If an employee has presented a strong case then it is vital to be aware of how much value they bring to their role and to the organisation and to evaluate possible forms of remuneration.

In such circumstances, if the organisation is unable to provide an increase for some reason, other forms of rewards that may be valued by the employee should be considered.

That being said, over-rewarding employees can be as counterproductive as under-rewarding, so it is important to understand not only what the company can afford to pay but what the current market rates are within the wider industry (as found in Ai Group’s Salary & Benefits Survey 2016 Report).

If you have them, involve experts and key decision makers such as your boss and the human resources team. In many workplaces the latter are responsible for evaluating pay rises and can offer invaluable advice about the appropriateness of such requests.

Finally, if you think your employee deserves to be granted a pay rise, then go into bat for them and communicate this to the relevant people.

Delivering the news

Not many of us would work for free so it goes without saying how important remuneration is to your employees.

…when it is not so good

If there is negative news, consider the employee’s feelings and how they may react to a refusal. When speaking to the employee, give them something more than a ‘no’ and provide constructive feedback. Avoid sugar coating the situation, be honest and provide the reasoning behind the decision.

Arming yourself with relevant research and effectively communicating this to the employee shows you have taken their request seriously and that it has been given due consideration.

In larger organisations, rigid pay structures and detailed performance and compensation policies may exist, so referencing these is crucial. Explain that you are paying the employee what the organisation feels is fair, that it was an organisational decision and that you are being consistent with internal strategy.

Even if a request has been denied you still want to see your employees be successful. Advise them on how they can increase their value to the organisation and, without making promises, how they can improve their chances of a future pay increase.

…when it is good news

If your employee’s request is successful, then is there anything to worry about when passing on the good news? There can be.

The workforce may get wind that head office is giving out pay increases for any that ask, so impress on the employee the efforts involved in evaluating their request and, where applicable, who it involved.

It is also a great opportunity to praise the employee for their performance and consolidate their pay increase verbally with positive feedback.

Final thoughts

Whenever an employee approaches you to discuss their salary, treat them with respect and listen to their case even if it is unlikely to be successful. It can be tough to ask your boss for more money, so keep this in the back of your mind and remember that they may be doing the company a big favour by bringing their issues to your attention.

Make sure you understand why the employee thinks they deserve a pay rise and that proper research is undertaken. Be aware of market rates and include the experts and decision makers, be it your human resources people or manager.

Even if the upshot is that ‘no money is shown’, if a clear and fair process is followed then it can be a positive experience.

Have you ever fielded an employee’s direct request for a pay rise? If so, how did you handle it and what did you learn from the experience? Please share your comments below.

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Clinton Fraser
Clinton is Projects Manager – Member Services at Ai Group. Currently responsible for a number of key services including HR surveys and benchmarking and the management of Ai Group’s new HR resource, HRinform, he has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.

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