What to do when an employee asks for a pay rise

When an employee approaches their manager requesting a pay rise, it can be a tricky situation for both parties. We explore the steps employers should take in considering and responding to such requests.

Ideally, all organisations and businesses would have a clear process in place to manage salary reviews on an annual basis that employees are aware of says Katea Gidley, Managing Director of Sagacity Search, an executive search firm.

“Employees are less likely to seek an ‘ad hoc’ pay rise, when they know there is a scheduled and objective process in place,” she says.

Responding to pay rise requests

If an ad hoc request is made, Gidley recommends managers refer to the business’s annual salary review process or if one does not exist, undertake to consider the request on its merit, responding to the employee within an agreed period, ideally seven to fourteen days.

According to Gidley, the manager should consider the pay rise request in light of:

  • The relativity of the employee’s pay to others performing the same job
  • The relativity of the employee’s pay to market rates
  • The desire to retain the employee

VIDEO: How to talk about salary with your staff

Reducing the stress for employees

Having a clear and regular (for example, annual) process, with the basis of the salary review known, removes stress for both the employer and employee.

“Where an employee does ask for an ad hoc raise, managers should treat the request seriously, committing to undertake objective consideration and responding within an agreed period,” says Gidley.

Delivering the news

Having deliberated and come to a decision, it’s essential to organise a meeting with the employee to share the reasons for how you have come to that conclusion.

“It is important that the decision is communicated in a manner that assures the employee objective consideration was undertaken,” says Gidley.

“Managers should share the details on why the decision was favourable or unfavourable, wherever possible referencing objective factors such as salary relativity, performance levels, market salary surveys, job grades and so forth.”

When the news is good, Gidley advises managers to reinforce the value of the employee and the desire to retain them into the future.

“If the pay rise is granted, it should be documented, and direction provided on when the next pay rise meeting will occur, typically at least twelve months between rises,” Gidley advises.

“If it is not granted the manager should advise the employee when the next review will occur and on what basis an increase would be provided.”

Alternatives to a pay rise

While some employers may believe that remuneration is the only factor that drives the retention of employees, Gidley says it is usually lower down the list compared to quality leadership, a positive organisational culture and work that is fulfilling and enjoyable.

SEEK conducted research into the topic of salary and benefits to understand the factors candidates and employees consider to be valuable if a pay rise is not available.

Popular incentives in lieu of a pay rise:

  • Flexible hours (working from home in particular was more likely to appeal to females than males – 29% compared to 14%)
  • Extra annual leave
  • A monthly rostered day off
  • Paid training or professional development
  • The report also found that higher income earners (>$83k pa) would be more likely to be kept happy in their current role with a promotion (27%). Meanwhile lower income earners (<$83k pa) are more likely to appreciate a day off for their birthday (20%) or having fruit/snacks available (10%).

“Additional benefits tend to be highly personal to the individual,” says Gidley, “so a ‘one size fits all’ approach is best avoided and where possible non-salary benefits should be tailored to the individual.”

Related content: How leading organisations reward their employees (without financial perks)

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