How do I deal with a pay rise request without cheesing off my employee?

When you’re a small business, it can be super-awkward when a member of staff asks you for an increase in their pay. Especially if you can’t afford to offer them more money, or you simply don’t want to.

However, if it’s somebody you value highly, you won’t want them to ‘up sticks’ and find another job 😱 Therefore, you need to be prepared.

After all, according to a CIPD survey, nearly a quarter of employees interviewed, asked for a pay rise within a two-year period. Which means it’s a situation that’s likely to crop up, right?

So, read my blog on how to respond when this happens to you 👇

TIMING IS EVERYTHING

When I say timing is everything, I’m talking about two things here:

#1 - The moment they pop the question

If they’re canny, your employee will have chosen an appropriate time to discuss their pay rise request with you. And, given you a heads-up in advance, rather than springing it on you.

If you are taken by surprise, don’t be lured into responding there and then. Just ask them politely to set up a meeting where you can discuss it properly and explain that this will also give YOU time to think about it too.

#2 - What’s going on in your business at the time 📊

The timing of your employee’s request is crucial. For example, if they ask you when you’ve just won a new contract, then you might be more inclined to say yes. However, if they ask while your business is going through a tough patch, the chances are you’ll say no.

Naturally, you’ll need to reflect on how your business is performing TODAY and what’s forecast to happen in the future – to determine your decision.

LISTEN HARD 👂

When your employee asks you for a pay rise, it’s all too easy to forget to listen to them. I know from experience that when the subject first crops up, your initial reactions might be negative ones:

😱 Who do they think they are?

😱 Where the hell has this come from?

😱 Do they think we’re made of money?

😱 How cheeky!

😱 Oh God, they’re gonna hand in their notice, aren’t they?

😱 They’ve been offered another job, haven’t they?

That’s why it’s SOOO important to listen hard to what they’re saying to discover the motive for asking you right now.

If they’re smart, your employee will have built a case in advance, even if it’s only verbally.

Give them an opportunity to put their side of the story across to you. It’s not easy asking for more money, so hear them out!

Here are some questions you might like to respectfully ask them:

  • Why have you chosen to ask for the pay rise now?
  • Why do you think the company should award you a pay rise now?
  • What other things, beyond pay, might you consider?

SIT ON IT FOR A BIT 🤔

Once you’ve heard your employee’s arguments for wanting a pay rise, tell them you’ll need a bit of time to think it over (I’m talking days not weeks!).

This not only buys you time, it also sends a powerful message to your employee that you take them seriously.

Use this time to reflect on what they said to you. Things to ask yourself are:

  • How well is this employee performing for me?
  • What potential do they have?
  • Have they shown me that they do deserve to be given more?
  • How does their performance compare to other employees?
  • Have they gone over and above for me?
  • Looking at what other employers are offering, is it fair what I’m paying them?
  • If I say no, are they likely to leave?
  • What will it be like for me if they do leave?
  • Is there anything else I could offer them?

I get it, it’s a toughie, you may even feel over a barrel on this one 😲 But remember, there is no obligation for you to award a pay increase, at any time.

THE ROUTES OPEN TO YOU

If you’ve decided to refuse the request, then there are various options you can take: 

  1. Say no and say why
  2. Say no for now, but you’ll review the situation again in three months. Then book that review session immediately to show you mean business
  3. Say no, but offer other employee benefits instead, based on the discussion you had and what you know might be important to them e.g. working from home one day a week
  4. Say no for now, but set out what they need to do to get a pay rise, and when they need to have done it by e.g. secure a new client within six months

COMMUNICATE YOUR WHY 🗣

Always be ready to explain your reasons for refusing a pay rise. At the end of the day, your justification is likely to boil down to their performance or your business performance. Or both!

If they’re a great performer and your business is doing well, it’ll be hard for you to justify refusing a pay rise. But, you could consider putting it off by committing to review things again within an agreed timeframe.

ARE YOUR POLICIES UP TO SCRATCH? 📑

A HR policy can help take the awkwardness away from ad-hoc pay rise requests. How? By specifying when your company will officially review salaries.

For example, by saying:

We conduct an annual salary review every March, as we pride ourselves on offering a competitive salary within our industry.

So, if an employee were to ask you in December for a pay rise, you could refer them to your HR policy where it states when salaries are reviewed. It also forces you to be fair and consistent with all your employees.

🛒 My PAY & BENEFITS TOOLKIT is perfect for small businesses in this predicament. It contains loads of super-useful templates which you can use to define and communicate the financial and non-financial perks you want to offer your staff.

TO SUM THINGS UP THEN

😳 Pay discussions can be awkward at the best of times

⏰ And what’s more, timing is a critical factor

👂 As a responsible employer, make sure you listen hard to what your employee is asking for and why

🙅 Never respond instantly. Take a bit of time to consider their request, which not only buys you time to think, but also shows your employee that you take them seriously

🤔 There are lots of things for you to consider and several routes open to you. But, it often boils down to their performance and your business performance – or both!

🗣 If you refuse your employee’s request for a pay rise, make sure you communicate your ‘why’

📑 And if you haven’t already, get a HR policy that states how pay rises are dealt with at your place, giving you something to fall back on

 

Mandy Hamerla

Virtual HR Director & Leadership Mentor. I create game-changing HR & Hiring Strategies for ambitious small businesses in the UK and support you to lead your team with confidence. Check out my shop to download HR Templates & Contracts designed to make life easier.

www.modernhr.co.uk