When it comes to salary negotiation, often employers are unaware of the employee's thoughts toward their pay until they receive a knock on the office door.
When this happens, consider these tips for managers on handling pay rise requests.
Here are five ways to deal with an employee's request for a pay rise:
- Treat the pay rise request seriously
- Diffuse any stress at the meeting
- Consult a salary guide
- Review the employee's past performance
- Offer an alternative to money
1. Treat the pay rise request seriously
Many employers’ initial reaction to a request for a pay rise is to say ‘no’. However, even if the question comes as a surprise to you, it doesn't mean you should act on impulse. Dick Grote, performance management consultant and author of How to Be Good at Performance Appraisals was quoted in the Harvard Business Review saying, "There’s nothing to gain from saying no right away, and you can’t say yes without checking with your boss or HR first."
The level of salary an employee earns can often feel like a tangible representation of the value they feel they are to the company. This can have a direct correlation on employee engagement and motivation, so all pay rise requests should be treated seriously and with respect.
A useful tip is to hear the reasons why an employee thinks they deserve an increase to their salary. Additionally, establish the parameters around the role and your own expectations, making sure the employee understands what is required to earn higher pay.
2. Diffuse the stress of the situation
For many employees, asking for a pay increase can be a nerve-racking event. Often they have built up a bank full of grudges and grievances about not being recognised before asking for a raise and their emotional state during the negotiating process can unhinge the situation. For both the employer and employee, it’s best to conduct a salary review when both parties have had a chance to prepare. To help remove the emotion, many organisations offer regular performance-monitoring systems, such as a six-month performance review, where both employers and employees can build on the discussion of reward and recognition with a salary review. Alternatively, granting annual bonuses in return for completed KPIs is another way the employees can feel rewarded financial for the work they have performed.
That said, there are times when a salary review isn't possible within the formal review process and managers should indicate to employees at that time if it's the case. In large companies in particular, there are often restrictions during the formal process so any grade raises or adjustments to salaries are handled separately. Employers should look to schedule these meetings at an appropriate date. In addition, avoid handing out extra pay after winning a new contract or customer. Having a regular and transparent process with regards to awards will help manage the build-up of emotion.
3. Consult the industry standard
Make sure you understand what the standard for the employee's role is in terms of pay before entering into salary negotiations. Compare the position against a relevant industry salary guide. Likewise, contact our recruitment consultant or your HR representative for advice on the current salary benchmarks before making a decision. Using a salary guide can help to better understand why your employee asked for a pay rise, and if you feel it is valid, can help your argument to your manager or HR.
4. Review the employee's past performance
When it comes to offering a raise, past results count more than promises of future performance. Extra pay should come from doing work above and beyond an employee’s defined role, and not simply fulfilling the contract. Consider the added value the employee is delivering to the business that is above and beyond what is expected in the role before considering awarding a pay rise. If you manage a team of people who have similar roles, be aware that if you award a pay rise to an employee who is achieving similar results to other employees, you may face multiple requests for other members of the team should the word get out.
5. Consider non-monetary alternatives
Often an employee asks for more money because they feel they are worth it or feel they have not been recognised for their hard work. If the company is not willing or able to offer up more budget, then offering the employee additional benefits could be a better option. These could include allowing the employee more flexible working hours, training or a new position where they feel their skills can be better developed. Keep these alternatives on the table during negotiations.
By treating it seriously, being transparent and balancing the needs of the business, managers can ensure a positive salary-negotiation process.