From time-to-time, your employees may feel they’re ready to receive a pay rise. This could be down to an increase in responsibilities, having gained more experience with your company or feeling they are underpaid.
As an employer, you must manage pay rise requests correctly. This includes being honest with your employees if you’re unable to provide them with the answer they want to hear. You need to do all you can to keep them happy, unhappy staff lead to a decrease in morale and productivity.
In this guide, we'll discuss why employees may ask for a pay rise, how to manage them correctly, and why you may have to decline the request.
Why would an employee request a pay rise?
Asking for a salary increase is something that most employees will do. There are many reasons why employees ask for a pay rise, for example if they have received a job offer from elsewhere.
But there are other reasons why an employee may come to you for a pay rise. So, let's discover them.
Following salary trends research
The employee may have undertaken research into how much other people are being paid with the same job title. This could involve looking at job adverts for a similar role to theirs.
They may have also asked friends or family who are in the same industry how much they're being paid.
As an employer, you should be aware of the current salary trends for your company and the wider market you work in.
Feeling underpaid on their current salary
Your employee may feel they are being paid below the average salary for their job. This could be for a number of reasons:
- Due to an increase in demand.
- Have taken on new responsibilities.
- Have been in the same role for a number of years.
- Have been made aware in job interview by a recruiter.
Having frequent one-to-ones with your staff will help you spot if they are feeling unhappy.
Have completed relevant development goals
An employee may request a higher salary after completing previously set development goals. By completing these goals, they are showing a commitment to progressing in your company.
They may build a business case around their skills, development goals, and workplace results they have achieved following their last performance review.
Have gained more experience
An employee may ask for a rise if they have worked beyond their job description and taken on new responsibilities.
They may have gained more experience from when they last asked you for a pay increase. Having this experience may lead to the right moment to have the conversation with you.
Finished working on a successful project
You may have had a spate of new clients which has led to bigger projects for your employees to work on. The completion of a project may lead to the employees feeling t's time to ask for a pay rise.
So, ensure you keep a note of the work employees do on big projects to prepare for the question to come your way.
When would an employee ask for more money?
Employees may ask for a pay rise at any time during the year. But, there are some periods when it's a natural time to make these requests. For example:
- During their annual performance review or appraisal.
- At the start of the financial year, when your business may have the budget for pay increases.
- After working for a set amount of months or years.
As an employer, it's important you understand when your employees request a rise.
They may have gained more experience from when they last asked you for a pay increase. Having this experience may lead to the right moment to have the conversation with you.
How to manage employee pay rise requests
Most managers and employers may handle pay rise requests the same way. But, you should never be rigid in your approach.
Take every request for a pay rise on its own merit. Look at the bigger picture as to why your employee is asking for one.
Here are ways to manage employee pay rise requests within your company:
Discuss the employees' reasons
First and foremost, you need to understand why they have asked. Having an open dialogue with the employee will help you to be clear on why they have asked for a pay rise.
You may be unaware of some of the workload they have taken on or the goals they have achieved. They may even surprise you with what they have achieved.
Remain professional
When an employee asks for a pay rise you must remain calm and relaxed, even if you do not agree with them. Body language is key and makes both you and the employee feel comfortable in what isn't an easy conversation.
Speak with the employee regarding their salary expectations. Not just for the current year, but for the future.
Review the employee's recent performance
This should be one of the first things you do when you receive a pay rise request, study their recent achievements and performance. It will be an easier decision if they have bought clear examples of their performance.
An employee's performance is not just based on how much work they have completed.
Consider non-financial alternatives
If you don't feel you can offer the employee a financial pay rise, then you should think about any non-financial alternatives you can offer. Especially if it is the wrong time of year for your company to be providing pay rises.
Why would you decline pay rises?
As an employer, you may have to decline requests for a raise in salary. So, you need to understand why this may be the case.
Financial constraints
You may simply not be able to afford to provide a pay rise at that particular time. For example, you need to wait until the start of the financial year for a sufficient budget.
Or, you may be waiting to win a big contract that would bring the finances into your business.This may mean you're able to provide your employees with a raise in salary.
Matching Market Value
If the employee asking for a rise is currently being paid the average salary, you may not need to offer them a pay rise.
This is why it is vital you keep up to date with the salary trends for the industry you work in.
Further development required
You may decline a request for a salary increase due to there being a requirement for further development. If this is the case, form a plan for the future with the employee. You can provide them with some career advice about the potential they have with your company.
This will make them feel more relaxed and see the bigger picture of their future plans. Ensure you plan a further meeting at a later date to discuss their development.
How to decline a pay rise request
Declining a pay rise isn't going to be an easy conversation to have with your employee.
Discuss with them what they have to do to secure the pay rise in the future. Ask them to take more responsibility in the company and in their day-to-day role.
Be aware that this isn't what the employee is expecting or wants to hear. So, take care when explaining your decision. Speak slowly, keep eye contact and ensure they feel as relaxed as possible.
Get expert advice on pay rise requests with Peninsula
From time-to-time your employees may ask for a salary increase. This could be down to job an increase in responsibilities, having gained more experience or feeling they are underpaid.
As an employer, you must manage pay rise requests correctly. This includes being honest with your employees if you are unable to provide them with the answer they want to hear. You need to do all you can to keep your employees happy.
Peninsula offers 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.
Want to find out more? Contact us on 0800 051 3687 and book a free consultation with one of our HR consultants.
