Nóra Cashe offers expert advice on handling a pay rise request from an employee while maintaining a positive and productive working relationship
The cost-of-living crisis has put severe pressure on business owners from various sources.
In addition to the increasing cost of energy, loans and raw materials, employees also seek higher salaries to help pay their bills.
Here are six steps to managing this sensitive topic.
1. Link pay rises to performance
When you first receive a pay rise request, the best thing to do is to ask for time. Not all employees make the same contribution to the business, so it is reasonable to say you need time to review the position.
If the employee makes a verbal request, ask them to submit a written request stating why they deserve a pay rise.
Once you have received the request in the format you require, advise the employee that you will review their performance with a line manager and, if appropriate, colleagues and clients. Give the employee a timeframe for when they can expect to receive your decision.
Your appraisal will examine factors such as productivity, quality of work, customer satisfaction, teamwork and adherence to company values.
2. Carry out a salary review
Once you’re satisfied that the employee’s performance is to the standard required, examine the market pay rate for the employee’s position. Recruitment companies generally publish salary guides, which can be helpful in this regard.
Consider your budget, projected revenue growth and profitability.
3. Be prepared to negotiate
You may need to enter negotiations with the employee on the pay rise amount. Your negotiating position will be influenced by factors such as the employee’s performance and the market rate salary for their role.
Once you have considered the position, you may want to make a counteroffer on salary. This could be a performance-based bonus or a flexible working arrangement depending on the employee’s preference.
4. Consider alternatives to a pay rise
Alternative benefits can help you hold on to a valuable employee even if your budget doesn’t allow you to grant a pay rise.
Depending on the employee’s priorities, flexible hours, remote working or more generous annual leave could satisfy the employee even if their pay rise was declined.
5. Decide who communicates the decision
The organisation must decide who informs the employee of your decision.
In bigger businesses, it is likely that the HR department will handle the process, but in an SME, the employee’s line manager will have to communicate the decision.
If you must decline a pay rise request from a valued employee because you do not have the budget to grant it, schedule a date in the future to review the situation.
Whatever the decision, ensure the employee receives a thorough explanation outlining the organisation’s reasoning. This demonstrates that the organisation takes pay rise requests seriously.
6. Maintain a positive working relationship
Organisations must balance employee expectations with the company’s financial constraints and market competitiveness. However, a transparent and fair process will help employees understand the reasoning behind the decision and maintain a positive working relationship.
Nóra Cashe is the Litigation and Compliance Manager at Peninsula
LOADING...