HomeStartup InsightsWhat To Do When an Employee Asks For a Raise

What To Do When an Employee Asks For a Raise

What is one thing to do when an employee asks for a raise?

When an employee asks for a raise, it can be a difficult decision to make. On the one hand, you want to reward your hardworking employees for their contributions, but on the other hand, you may be constrained by budget constraints. We asked CEOs and people managers the question above for their best pieces of advice. From giving clear timelines and action steps to finding out the root cause of the ask, there are many tips to help you make the decision that’s right for your business.

Here are 10 pieces of advice for what to do when an employee asks for a raise:

  • Give Clear Timelines and Action Steps
  • Benchmark their Job
  • Evaluate Finances
  • Use It as An Opportunity O Learn About Your Employees
  • Ensure the Employee and Manager Are Aligned on Role Expectations 
  • Analyze Industry Standards
  • Do An Internal Pay Audit
  • Be Prepared to Listen
  • Don’t React Right Away and Ask Them to Elaborate
  • Find Out What’s Bothering Them and Discuss It

Give Clear Timelines and Action Steps

When an employee asks for a raise, and that employee is either unready to receive a bump in pay or the employer is unable to give one presently, it is a good tip to give a timeline for the next review, preferably within the next six months. Be sure to make clear that this milestone is a promise to re-assess the situation and not a guarantee of a pay increase, give the reason behind the delay, and lay down clear performance expectations for the employee in the interim. This step provides the employee with a clear picture of the timeline for compensation consideration and logic for delaying immediate action.

This approach can eliminate ambiguity and prevent staff from getting anxious and seeking employment elsewhere if a pay increase is a possibility in the not-far-off-future, albeit not immediately.

Tasia Duske, CEO, Museum Hack

Benchmark their Job With Measurable Contributions 

When an employee asks for a raise, they may consider that they are underpaid or that their contributions to the business warrant a pay increase. Instead of approving or denying the raise, ask the employee to list their measurable contributions and detail how they add to the business’s overall success.

As the manager, you must evaluate their job description and determine if any significant changes may warrant a pay increase. If you think their request is justified, request that your HR representative benchmark the job.

This will require a review of the job responsibilities contained in the job description. The company size and industry will also be reviewed for comparative analysis. If there is a discrepancy or if there were significant changes in the employee’s job from the time they were hired, it may warrant an increase in pay. Each step in the process must be communicated clearly to the employee.

Annette Harris, Founder, Harris Financial Coaching

Evaluate Finances

Sometimes an Employee asking for a raise can be a sign of things to come. The economic environment may be shifting in a way that means employees will need to earn more in order to live comfortably. It may not be a bad idea to look at what’s currently going on in the job market and the economy as a whole. You may need to consider your options if an economic shift may be on the way. With this information, you’ll be able to better understand an employee’s situation and if you plan on retaining them, have some general information with which to negotiate or make other compensations that will make it possible for that employee to remain on the job.

While it won’t always be a sign of major changes to come, if employees are asking for a raise then it won’t hurt for you as an employer to understand where their coming from and what you can or can’t do for them from a financial standpoint.

Boye Fajinmi, Co-Founder and President, TheFutureParty

Use It as An Opportunity to Learn About Your Employees

When an employee asks for a raise, it is important to see this as an opportunity to learn about your employees. Figure out their long-term goals and give them a chance to provide their value proposition. This can help you as a business figure out what your employees need to feel content and could be an opportunity to find new responsibilities that an employee can take on for a raise, which is a win-win for everyone.

Ann McFerran, CEO, Glamnetic

Ensure the Employee and Manager Are Aligned on Role Expectations 

When an employee asks for a raise it is important to ensure that the manager and the employee are aligned on the expectations and execution of the role, and ultimately whether their current and expected pay are consistent with the level and quality of work delivered.

If the employee is performing well and is already appropriately paid, it may be a good time to start discussions about career advancement. However, if they are not meeting expectations, it may be a good opportunity to provide coaching and feedback. Lastly, if they are performing well but below market in pay, a meaningful increase with sincere feedback might be a great tool to recommit them to the organization!

Tyren Thompson, Compensation Partner, Zoom

Analyze Industry Standards

Analyzing industry standard pay rates is one good idea. When an employee asks for a raise, it is always important to see what one’s competitors are offering. If they are paying more for a role that is essentially the same, that employee may consider leaving your company unless you match it. Be thorough in your research and determine an amount that is fair based on it.

Lyudmyla Dobrynina, Head of Marketing, Optimeal

Do An Internal Pay Audit

Do an internal audit. See what others at your company are making for similar work, as well as how their experience level contrasts with the employee. You may find that the employee is being underpaid or that their compensation is equivalent with others. Either way, the results of your analysis can help inform your decision.

Brian Munce, Managing Director, Gestalt Brand Lab

Be Prepared to Listen

I work a lot with founders and leaders in start up and scale up businesses. When someone asks for a raise it often prompts a defensive response at first – if there’s no budget for a raise or the manager thinks the employee’s request is unfounded it’s easy to reject it out of hand, or be annoyed with the employee for daring to ask.

But asking takes courage, and dismissing them is likely to harm employee engagement and commitment. Instead, ask them what’s prompting the request and be prepared to discuss it and either consider it or explain why it isn’t possible.

The answer may still be the same, but if the employee feels heard they are more likely to maintain their level of commitment and performance

Jacqui Jagger, Founder, Beyond Boundaries Coaching

Don’t React Right Away and Ask Them to Elaborate

Don’t react right away as you probably need to check with your boss or HR first but I’d recommend just telling the employee: “Tell me more.”

It shows the employee you’re not dismissing the request, and it gives you more information about where the person is coming from and why they deserve the pay increase. Also, take notes and ask follow-up questions if necessary. You need enough information to later decide if the request makes sense.

Then think about if the person is paid fairly compared with the rest of the team and also the market (how much does a person doing this job in another company get?) You should also consider how important this employee is to you, your team, and the company. If you have a good performer and you’re concerned about retention, press your manager and HR to grant an increase.

Margaret Buj, Interview Coach and Sr. Talent Acquisition Partner, Mixmax

Find Out What’s Bothering Them and Discuss It

I would ask an employee what he or she thinks his or her worth is and whether that matches up with the company’s compensation structure. If the employee is asking for more than what the employer is willing to pay, then I would probably move on from the discussion.

If the employee is confident in their abilities and has some knowledge of what they are worth, I will listen to their request and discuss with them options for increasing their salary. Suppose the employee doesn’t know where they stand in relation to other employees or doesn’t have a good understanding of how to improve their situation. In that case, I may not be able to help them improve their situation without some form of training or development.

Ayush Singhvi, CEO, Byldd

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