Ellen Warden, SPHR, SHRM-SCP
WorkPlace Synergy, LLC
Do these words make you break out into a cold sweat? Well, get ready. According to a recent Glassdoor survey, employees are feeling more confident about asking for raises this year — 43% expect an increase of 3%-5% in the next 12 months. More than one third of survey respondents say they’ll quit if they don’t get a raise, and nearly half (48%) of all respondents say they’re confident they can find a job matching their current experience and compensation levels in the next six months.
A salary increase can be recognition of hard work, long service, strong revenue generation, or a change in market conditions. Regardless of the reason, it can make an employee feel valued and stimulate higher productivity.
So why does the question strike fear into your heart? It’s because the employee that asks for the raise is communicating to you that he is not satisfied with his current situation. Even if you agree a raise is deserved, economic factors can impact your ability to increase salaries. If your revenues are erratic, you may be less willing to take on increased firm expenditures. On the other hand — particularly in the small firm environment — you may deem an employee so critical to your operation that you are not prepared to take the risk of losing him or her.
So what’s the right thing to do when a valued employee asks for a raise? Don’t panic. There’s no need to rush an instant response that could come back to haunt you. But you do need to consider the request seriously. . An employee who asks for a raise has probably already launched a job search or is at least taking a cursory look at other opportunities. Try these strategies:
1. Don’t “Just Say No”
If you say ‘no’ right away, it could suggest you don’t really value your employee and aren’t willing to even consider increasing their salary – and that could drive them straight out the door.
Thank the employee for approaching you, and offer a time for another chat. Discuss the reasons for their request – and what more they can offer to you should you choose to increase their salary. In requesting a raise employees usually mention myriad reasons, some of which are:
• Their personal expenses have increased.
• They’re proud of their accomplishments, and they deserve more money.
• They think they’re underpaid compared to their peers in your or other firms
• Their newly added responsibilities warrant an increase.
Give them your full attention. Empathize, acknowledge their concerns and seriously consider their side.
3. Do Your Research
Examine the employee’s performance to see if you agree that it justifies a raise. Consider any special skills, major accomplishments and/or credentials and mastery of day-to-day duties. An employee who consistently goes above and beyond job requirements, is central to the practice , and who helps to mentor and train other employees is likely to be more deserving of a raise than a competent employee who hasn’t increased his skills or assumed additional responsibilities since his salary was set.
4. Review the Local Market
Identify the pay rates for comparable positions. Consider internal equity to determine the impact a raise would have on the organization as a whole. Assess your ability to attract employees. Are jobs in high demand? Can you attract a qualified replacement relatively easily? Are the employee’s skills in short supply or difficult to recruit for?
5. Evaluate Firm Finances
Determine if your practice is in a position to handle an ongoing increase to the employee’s base salary. Remember that an increase to the base typically results in increases to related benefits. Each position in your company has a certain value, as determined by the marketplace and your firm’s compensation philosophy. An employee’s personal finances aren’t germane in this situation. Nor is the employee’s performance, if the ceiling-value of the person’s job responsibilities has been hit. If finances won’t allow for an increase be prepared to discuss how to make it happen.
6. Consider Alternatives
Obviously you can say ‘yes’ or ‘no’, but you can also say ‘yes, but not right now’. Or, ‘I can’t give you this raise, but I could give you this as an alternative’. Perks like extra paid time off or a bonus could be enough to make them feel valued and appreciated and want to stay.
7. Present the Facts
Clarify how raises are determined, the firm’s compensation plan, the worth of a job’s role to the firm’s bottom-line, the employee’s performance, etc. If you determine the person is underpaid and/or you don’t want to risk losing the employee, indicate a raise is possible with some provisos. Agree on how the position can be increased in value to the firm, and how her/his responsibilities can be expanded to generate more value.
8. If the budget is too constrained, be candid. But offer hope.
If you deny the raise, give the employee an explanation. Overcome the employee’s concerns with facts and relevant information. Provide the rationale behind your response and set clear expectations for the future. For example, “I’m willing to give you the raise you asked for in three months if you can show me evidence that you’ve done A, B and C.” This gives your employee an incentive and sends a message to others that you’re not willing to automatically grant raises whenever asked.
Retaining employees, especially valuable ones, can be difficult. The right answer to “I need a raise” will ultimately depend on your practice, your budget and the employee in question. Regardless of whether you decide to reward an individual who seeks a raise, show them they are valuable to your firm and provide candid feedback they can use. Often, it is not more money they seek — it could be recognition, career advancement, more challenging work, and many other factors that play into their daily lives.