Hays’ Chris Dottie advises leaders how to navigate conversations around pay rises and salary negotiations.
Some of the trickiest conversations you can have as a senior figure within an organisation are those around pay rise requests. They’re a veritable minefield to navigate, during which a misconstrued word could quickly escalate the situation into full confrontation – or worse, resignation.
Having said this, it helps to regard pay rise requests not as a nuisance, but as an opportunity to reward and retain your top performers. By coming to you before looking outside of the business, that employee is demonstrating a loyalty and a fondness for your business and, if your business is performing well, then this is a great opportunity to acknowledge them.
It differs from business to business how much clout you, as line manager, have in issues of remuneration. Some businesses have quite a tight pay structure, where incremental adjustments to an employee’s salary can only be made once they’ve hit hard, quantifiable targets.
Others, usually smaller businesses, will have a more flexible system of salary negotiation. Owing to the size of the business, the worth of employees and hopefully the business itself will constantly be evolving.
Irrespective of how large or successful your business is, there are some common practices that we all should adhere to when approached for salary negotiation.
Give yourself time to think
Have a system in place where employees have to fill out a self-evaluation form when requesting a pay rise. The two principal benefits of this are that, on the one hand, you’re asking the employee to properly think through and justify their worth while, on the other, you’re giving yourself time to respond.
A system like this as opposed to employees accosting you without warning in the corridor prevents immediate, unfiltered and potentially disastrous exchanges.
A delicate situation such as this requires careful thought. Don’t rush yourself. Use this time to think through why the employee is asking for a raise. Do they truly believe they’re worth it, or are they just trying their hand?
Honesty is the best policy
Asking for a raise is a potentially uncomfortable exercise to go through, so reward the employee’s courage with complete honesty. Honesty should be a central tenet of your management philosophy anyway, but when it comes to salary renegotiation you need to demonstrate absolute clarity when reviewing the employee’s performance and their prospects of obtaining a pay rise.
Honesty will help the employee feel confident in their relationship with you and it will also encourage them to match your honesty.
You can leverage this openness by asking them, ‘If you were the manager, would you give yourself a raise?’ If they have any reservations, then so should you!
Take them seriously
It’s important that you take the employee’s request seriously – as mentioned earlier, they have probably worked up a bit of courage to approach you. Don’t try and avoid the request or play it down. Having had them fill out a self-evaluating form, organise a formal meeting with them to discuss and review their proposal.
It’s also imperative that you do your research so that you’re able to properly substantiate your appraisal. I mean this both in terms of their individual performance and also what the average salary is for someone in their position.
Are you paying in line with your competitors? You might find that you’re already paying the upper end of the market rate to keep that employee and as such you’d be advised to either refuse their request or move onto the next point.
Reward your top performers
Most importantly, if you feel as though the employee is a vital cog to your machine, then reward them with a salary increase. Denying an employee a salary increase can be hugely demotivating, even if you do try and assuage their pain with alternatives.
Permitting your employees a salary increase can be hugely empowering for them. It’s a really good way to keep your staff motivated, demonstrating to them that there is a clear path of progression for them within the business. If you find yourself with a really tough call to make, then ask yourself two questions:
- Can your business afford to increase this employee’s salary?
- Can your business afford to lose this employee?
You might find that, while your budget will take a bit of a hit from increasing the employee’s salary, it will take a lot more of a damage from having to source, interview and train a brand-new member of the team – and even then there’s no guarantee that this new employee will match the expertise and proficiency of their predecessor. It’s an assessment of resource not just in terms of capital, but also your time.
Think of the cash alternatives
If your business cannot afford or does not allow for a further salary increase, then try and reach a compromise by offering other means of reward. Some of these include added influence or autonomy within the business, more exposure to top clients, opportunities for business travel and so on.
It might be that your employee is fully deserving of a raise, however they’ve just made the request at the wrong time. In such a situation, it’s useful to keep a list of non-monetary benefits in reserve to retain their services.
Keep abreast of developments
Annual performance reviews simply don’t cut it any more. As a manager, it’s your responsibility to closely monitor the performance and growth of your team anyway, but following an unsuccessful salary increase request, you should make an extra effort to map that employee’s progress.
Following their unsuccessful appeal – assuming they’re still at the business – you should have mapped out a path for them whereby they can eventually obtain a salary increase. Let this team member know that you’re invested in their development by arranging periodical reviews.
Managing the flock
The key to dealing with pay rise requests is fairness. Evaluate each employee’s worth both in terms of the quality of their performance and also the value of the job itself and the going market rate for their role.
Be totally transparent with your reasoning throughout the process and then, whether successful or not, you’ve given yourself the best chance of retaining a happy member of your team.
It’s also important to mention that you shouldn’t only award salary rises to those who ask for it. Rather than seeing the whole process as a game of whack-a-mole – dealing with requests as and when they come in, as a means of ridding yourself of ‘nuisance’ issues – you should make it your priority to be constantly assessing and grading all of your employees’ worth, for them to come to you should be a last resort!
After all, awarding a member of your team a surprise pay rise is probably the biggest motivator of all.
By Chris Dottie
Chris Dottie is the managing director of Hays Spain. A version of this article previously appeared on the Hays Viewpoint blog.