When an employee asks for a raise, it can be stressful and sometimes a little frustrating. You have a hundred things on your plate at any given time, and handling an employee raise request can feel like a nuisance.
At the same time, if your employee is asking for a pay raise, it means that they’re not fully content with their job. In today’s difficult labor market, doing your best to retain good employees is vital. And meeting salary expectations is one of the most effective ways to recruit and retain the best.
Here are 6 things you should do when an employee asks for a raise.
1. Don’t immediately react when an employee asks for a raise
Whatever happens throughout the conversation, don’t immediately react either way. There’s nothing to gain from outright declining their raise request and you likely can’t agree to a raise without first talking to a few other individuals. Instead, thank the employee for coming to you and then dive deeper to learn more. After your discussion, allow time to consider their raise request and all the relevant details before making a decision.
2. Put yourself in the employee’s shoes
It takes a lot for an employee to muster up the courage to ask for a raise and many times requests for more money are not unfounded.
“An employee could be asking for a raise because their rent just went up or their car unexpectedly broke down,” says ALTRES Staffing Manager Emy Yamauchi-Wong. “They wouldn’t come to you if it wasn’t impacting them enough to ask, so always put yourself in an employee’s shoes when responding.”
Regardless of whether you can offer the employee a raise, Wong suggests using the opportunity to reaffirm your commitment to the employee and show your appreciation for everything they do. Above all else, handle pay raise requests with dignity and respect.
3. Discuss why the employee is asking for a raise
If your employee is savvy, they’ll come prepared with a strong argument for why they deserve a pay raise. Listen to their points and be ready to ask follow-up questions. Has their workload increased? Have they single-handedly improved sales by a large percentage? The employee should have numbers or evidence to back up their raise request. If not, ask them to put that information together for your review.
4. Look at the job market to see how competitive your pay is
Every position is worth a certain amount, and that amount is typically determined by the job market. If the employee brings a market salary range as an argument for a raise, ensure that it’s referencing a Hawaii pay scale. Mainland salaries are often higher than Hawaii pay ranges. Also realize that it’s possible that the employee has simply reached a limit of the value that can be placed on their role. If this is the case, and you want to keep them with your company, you may need to look at promotion opportunities.
5. Consider the implications of granting or denying an employee’s raise request
It’s important to think about what granting or denying this request could mean. For example, it’s possible that another employee will find out about the raise and want a piece of the pie as well. Is your company prepared to handle that? You should also consider the possibility that your employee could quit if they don’t receive a pay raise and what that would mean for your business? Replacing a high-level employee can cost up to 200 percent of their annual salary. Could you handle that cost, not to mention the lost time, if your employee quit?
[ Read more: Is Paying Your Employees Less Costing You More?]
6. Weigh all your options before making a decision
Although it may seem that there are only two ways to answer a raise request, there may be other options, depending on the situation.
“An employee who is stressed about making ends meet is not going to be their normal, productive self,” says Wong. “You shouldn’t give a raise just because an employee needs the money, but are there other options you can offer like an advance on their pay or extra work for overtime hours?”
Some other options: Can you negotiate by offering your employee another benefit or perk instead? A flexible schedule or a promise of an annual bonus is usually a well-received perk. Another option is to say yes, contingent on the employee meeting certain criteria over the next however many months. For example, requiring them to meet a certain number of sales goals or to improve X, Y, and Z in their performance. Be sure to consider every avenue before making your final decision.
At the end of the day, when an employee asks for a raise you must consider how important the person is to you, your team, and the company. By keeping these things at the forefront of your mind, handling an employee raise request will be a much easier process for everyone involved.
Questions about competitive pay rates or staffing in Hawaii? Contact us today!