The way your team are remunerated can play a key role in your company’s ability to attract and retain quality talent. And whilst we are entering into a period where many companies have scheduled annual pay reviews, some staff members may bring up the topic of an unscheduled pay rise prior to the review process.
As a people manager, it is important that you understand how to appropriately handle any salary increase requests from your team. This includes the steps you should take to assess the request, how to communicate with an employee about their request, especially what to do when a pay rise may not be possible.
Step One: Handling a pay rise request
Take the time to actively listen to the reasons why your employee feels they warrant a salary increase. Since their last salary review, they may have completed new qualifications, started to take on new projects or responsibilities that have increased the size of their role, or it may be that their current role has changed over time to now differ from their original job description or scope.
Once you have gained an understanding of the employee’s perspective on why they deserve a salary increase, it’s time to consider all the options around their performance, role overview and current responsibilities to gain the facts behind the request.
Step Two: Review the facts around the request
A good place to start is reviewing the employee’s HR file to examine their identified formal duties, current salary (including incentive schemes or bonus, allowances and/or education fees) and any additional projects they may have been or are currently involved in. Some further aspects to consider as a part of this review include:
- Do they go above and beyond normal job requirements regularly?
- Are they continually demonstrating an eagerness to learn and improve their role and business understanding?
- Are they consistently meeting deadlines, performance metrics or key performance indicators?
Once you have this information ascertained, you can start to consider if the individual staff member has justified the requested pay increase.
Step Three: Understand the current salary market for your industry and team roles
Salary Benchmarking is a process by which you can assess your internal job descriptions and match them to roles described within established salary surveys. By participating in salary benchmarking for your business, it helps to give you an accurate reflection of your current remuneration levels and allow you to make informed and effective future decisions around remuneration.
If you have recently performed salary benchmarking within your business, you will have a clear picture of the current salary ranges that apply to your team and industry to understand if this request is reasonable or not.
Step Four: Updating your employee about their pay rise request
Now that you have reviewed all of the information available to you, you should feel ready to make a decision. Before meeting with your employee, take a moment to perform a sanity check on your reasons for either awarding or declining this request. This could be with your internal HR Manager, another member of your leadership team or a member of our HR On-Demand team, to ensure that the reasons are clear and appropriate.
- What to do if you can provide a pay increase:
If you have decided to award a salary increase, ensure that you explain their new annual salary (including any changes to incentive programs, allowances or bonus payments), along with the reasons behind the pay rise.
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 a copy of this letter is kept on the employee’s HR file and notice provided to payroll of the change.
- What to do if you cannot provide a pay increase:
In some circumstances it may not be possible or practical to provide a pay increase.
Schedule a private meeting with your employee to explain the reasons for not increasing their salary at this time and be sure to give your employee ample opportunity to ask any questions to ensure that the review process is transparent.
In some cases, there are alternatives to offering a salary increase though the offering of non-monetary benefits tailored to the preferences of individual employees for example flexible work arrangements, or opportunities to work from home can reward employees with greater work-life balance, in turn can encouraging loyalty to the business.
Treating pay rise requests seriously and with honesty shows that you care about your people and value their contribution to the business. However, also taking the time to outline to employees the reasons behind any awarded pay increases, you affirm that outstanding performance is rewarded and something worth aiming for on a consistent basis.