The way your staff are remunerated can play a key role in your company’s ability to attract and retain quality talent. While many companies schedule annual pay reviews, some staff members may bring up the topic of an unscheduled pay rise before the review process.

As a manager, it is important to know how to handle pay rise requests, the steps you should take to assess and communicate with an employee about their request for a pay rise, and what to do when a pay rise may not be possible.

Handling a pay rise request

To avoid being caught off guard, start by having a process in place in case an employee asks for a pay rise out of the blue. Whatever the situation may be, address the pay rise request professionally, especially as it can be quite stressful for an employee to initiate this conversation.

Take the time to really listen to the reasons for why an employee feels they deserve a salary rise. It may be that they have gained additional qualifications in their own time, or they may be steadily taking on greater responsibilities on a day to day basis that differs from their original job description.

Weigh up whether to offer a pay rise

Once you understand your employee’s perspective on why they deserve a pay rise, it’s time to consider whether the request really is deserved.

Review the employee’s file beforehand to remind yourself of their formal duties, their current pay and any additional projects they may have been involved in.

A range of factors can determine whether an individual staff member deserves an unscheduled pay increase. Some aspects to consider include:

  • Going above and beyond normal job requirements
  • Continually demonstrating eagerness to learn and improve
  • Consistently meeting deadlines and demonstrating unfailing reliability
  • Maintaining a positive attitude that motivates other team members
  • Adding value by finding better ways to complete tasks

Know what current salary levels look like

Before entering into any pay rise negotiations, understand the current market salary for the employee’s role in your industry and location.

The Robert Half Salary Guide is a useful source of information here – and not just for your own reference. Your employee may be unaware for instance, that they are already receiving an above-industry wage. Similarly, if you do offer a pay rise, a salary guide can lend weight to any figure you propose.

Informing an employee about their pay rise request

To make your pay rise process transparent, schedule a private meeting with your employee to discuss your decision regarding a pay rise request. If you do decide to go ahead with a salary increase, thank them for their contribution and explain their new annual salary and the reasons behind the pay rise – being as specific as possible about the extra contribution they have made to the company.

Follow up the meeting with a formal written notification of the pay rise, outlining the new salary, and the value of the pay rise both in dollar and percentage terms. Ensure that either yourself or your HR department keep a copy of this letter in the employee’s file.

What to do when a pay rise is not possible

There can be circumstances when it is not possible or practical to offer a pay rise. It can be a matter of economics where the company simply cannot afford increased labour costs due to budget restrictions, or that the employee’s performance does not warrant an increase despite putting forward their case.

Similar to the aforementioned step, schedule a private meeting with your employee to explain your reasons for not increasing their salary at this time. Be sure to give your employee ample opportunity to ask questions to ensure that the review process is transparent.

In some cases, there are alternatives to offering more money. A range of non-monetary benefits can be a valuable perk especially if they are tailored to the preferences of individual employees. If the company is not in a position to pay more, fringe benefits such as the use of a company car, flexible work arrangements, or opportunities to work from home can reward employees with greater work-life balance while also demonstrating trust. This in turn can encourage loyalty, and help to prevent a valued team member looking for opportunities elsewhere.

Helping your employees understand your company’s pay system and how their salary is determined can help them understand what it takes to achieve a pay rise. Yet, it can be easy to overlook this step.

Treating pay rise requests seriously and with honesty shows that you care about your people and value their contribution. By balancing the needs of the business with those of your staff, an unexpected request for more pay can have positive outcomes for everyone, and help your company retain quality professionals.

Maintaining a regular and transparent performance review process encourages employees to feel comfortable about approaching you to discuss their current pay level. By explaining why a staff member is receiving a pay rise, you are reaffirming that outstanding performance is rewarded and something worth aiming for on a consistent basis.