March 13, 2019 HR On-Demand
How do I turn down my employee’s request for a pay rise?

It’s something that every Manager has had to face at some point, and with July coming up fast the question is already being asked – How do I reject an employee’s pay increase request? Now in a perfect world, employees would only ask this question if they had added more value to the business over the past year – but what do you do when an average or poor performer asks for a pay rise?

There are many misconceptions about pay increases – some stem from older traditions such as ‘everyone gets an annual pay increase’ and others stem from employee’s misconception about what they need to do to earn a pay increase.

So, what do you do when you’re asked the question and you need to say no?

  • Listen to the employee’s reasoning

Why does s/he feel they are entitled to a pay increase? Maybe their workload has increased, or they have taken on new responsibilities? Perhaps they feel they are being underpaid relative to the market, or relative to other employees? Whatever their reason may be, it’s important to let the employee feel heard and to gain insight into their mindset when it comes to financial reward.

  • Consider the request and explain the company’s reasoning

After hearing the employee’s reasoning, it’s important to address the core reason that he/she is asking for a pay increase. If your employee feels that tenure alone is enough to warrant a pay increase for example, explain that it’s not sustainable for a business to be paying more each year for the same tasks to be completed. Be clear in telling your employee what they need to do to earn a pay increase is not only perform his/her role to an exceptional standard, but they must be adding new value to the business that the business is willing to pay for.

  • Respond and offer guidance

It’s important to give an employee more than a ‘no’ or a ‘yes’ in these situations. Providing a rationale for your response (be it business finances, performance or other reasons) shows respect for the employee and their request, whilst giving you an opportunity to be open and honest about the business’s performance, the employee’s performance and/or other matters. Be open with the employee about what you (or the business) needs from the employee in order to justify a pay increase, and where possible, guide him/her on potential ways they can increase the value they contribute to warrant a pay increase.

  • End on a high note

Wherever possible, end the meeting on a high note by reinforcing the employee’s value to the business – this way, even if the response isn’t what the employee wanted to hear, they are still able to leave the meeting with pride and dignity intact, and with a feeling of appreciation.

Where do your Managers go to get information about employee issues and managing difficult conversations with employees? Are you sure they have the support to make the right decisions?

HR On-Demand’s Director level consultants provide Managers with advice and on the spot coaching to help them manage people issues, and our monthly webinars are designed to develop your employees and help them be more productive. For more information, call us on 1300 55 99 62 or email

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