Employee Pay Raise Requests

Managing the salary conversation with your staff is one of the most sensitive topics you can cover, and one many of us would rather avoid.  COLA increases aside, if an employee comes to you with a request for higher salary, if you address it respectfully and transparently then these should not be stressful interactions.

INFORMATION GATHERING

The first thing to accept is that it’s okay for an employee to ask for more money, and you do not need to provide an answer during your first meeting. In fact, use this first meeting for research and information-gathering from your employee.  During this stage you need to be curious. Some employees might not be fully aware of the current market conditions for their role, or they believe tenure plays a larger part in the decision-making process.   Ask them to send you the market data that they have found, and anything else relevant to support their request, so that you have enough time to fully review it and compare it with your own research.

If your employee raises this salary conversation during an annual performance review, set clear expectations that a second and separate meeting will be needed. If you try to tackle it during the annual review, they will only be focused on salary and not the performance aspect.

MARKET RESEARCH

Perform your own market research with the various online tools available, as well as your personal network.

-          Use all the various current job sites online. While not all postings list a salary, many do.

-          Use your professional network. For some more niche or higher-level roles, reaching out to your network to hear what they do can guide you well and make you confident you are on the right path.

-          Compensation survey reports. Most industries produce a report at a relatively low cost. However, remember that these reports come from data supplied directly from organizations like you and so it’s important to participate if you see value in these reports.

VALUE PROPOSITION

Just like a business’s value proposition, there is also an employee value proposition. If you believe your organization provides an excellent working environment, then this should form part of the conversation, just like it would when discussing tangible benefits. If your employee references a salary offered by a competitor, but it’s common knowledge that the competitor’s work environment is less than ideal, then ask your employee what is most important to them.  Will they lose autonomy? Will they lose flexibility? Will they lose a respectful working environment?  

TENURE & TITLE

A common argument raised by employees during these conversations is tenure. “If I have 20 years’ experience then why should I be paid the same as someone else who only has 2 years’ experience?” Great question. If an employee with 20 years’ experience only provides the same productivity or value as an employee with 2 years’, then why should they be paid more.  Someone with 20 years of experience should be able to do the job quicker and better than someone with significantly less experience, thus providing a great deal more value or productivity. Review and make that determination.  In certain circumstances a one-time bonus instead of an on-going rate increase may be the most logical choice.

With an ever-increasing number of VP titles thrown around, regardless of actual responsibility or work performed, it can push organizations into a corner in terms of compensation.  When performing your market research, look past the title and focus on responsibilities: What is the size of the overall organization & operating budget? How many staff do they oversee? What are their deliverables?  Is this a 60 hour per week job with high stress, or 40 hours +/-?

ACCEPT THE REALITY

At the end of the day, you won’t satisfy everyone or every request, but if you are using relevant market data and are transparent in your process, you should be able to close out these conversations respectfully. It will be very easy to sweep this under the rug and provide any increase requested, but anytime you pay an amount above the going market rate for a service, you are setting your organization up for a future problem.  Market conditions, while not always perfect, should always be used when determining any type of pricing / costing, including employee compensation.