Just like a resignation, a request for a pay rise can strike fear into the heart of any employer or HR professional. Why? Because when an employee asks for a pay rise, it’s their way of communicating to you that they’re not happy with their current employment status at your business – and potentially it could be their first step towards leaving your company should you not be able to offer them what they’re looking for.

With that in mind; it’s no surprise that a lot of employers panic when one of their employees asks for a pay rise but that’s really the worst thing you can do. If you panic at this point, you’re more likely to make a rash decision which could come back to haunt you and could cause irreversible damage to your business later down the line.

That said; we’ve come up with eight things that you need to do when an employee asks for a pay rise.

1. Don’t Say ‘No’ Straight Away:

As I just mentioned, it can be really easy to panic when you get a pay rise request and say ‘no’ straight away, particularly if you’re already keeping a close eye on the business outgoings – but you need to resist. Why? Because if you say ‘no’ right away, it could suggest you don’t really value that employee and aren’t willing to even consider increasing their salary – and that could drive them straight out of the door.

2: Discuss The Employee’s Reasons For Their Request:

Rather then saying ‘no’ straight away, either schedule another meeting with the employee or sit down with them straight away to discuss their reasons for their request. Find out why they think they deserve a pay rise, how long they’ve wanted a pay rise – and what more they can offer you should you choose to increase their salary. At this point it’s also a good idea to try and find out how serious the employee is about an increased salary and what they might do should they not get it. If you can, try and keep these discussions confidential. If you keep these discussions private, you minimise the risk of other employees finding out and starting to question their own salaries. A flood of pay rise requests is something no employer wants to ever have to deal with…

asking for a pay rise3. Look At Market Conditions:

When you’re busy running your own business, it can be easy to get into your own little bubble and forget that there’s a whole market place out there – so at this point it’s a good idea to look at what’s going on outside of your business. Consider what your competitors or similar businesses in the area are paying their employees for similar roles (job boards can be a great tool for this) and take a look at how the salary you’re currently paying your employee compares. It could be that since your employee has been working at your business, demand for their skills and experience has increased ten-fold and they could literally double their salary if they chose to leave…

4. Consider The Employee’s Performance/Dedication To The Business:

If you value the employee and don’t want them to leave your business, the next thing you need to do is consider the employee’s performance and their dedication to the business. Consider when they last had a pay rise and what (if anything) has changed since then. It could be that you bought them in a year ago on a junior position and they’ve quickly progressed to a management position but their pay doesn’t reflect this. On the other hand, it could be that since you took them on, they’ve given up some of their responsibilities – so they’re actually probably being a bit overpaid. In this situation, you’ve definitely got a case for refusing to grant the employee’s pay rise request.

5. Consider The Implications On Your Other Employees:

When reviewing a pay rise request, it’s worth considering what the implications might be on your other employees should you grant the request. If you run a small business where your employees are close, even if you keep the conversations confidential, chances are your other employees will find out at some point – and if you do grant the request, it could cause more employees to make their own requests…

6. Consider Your Options:

When it comes to a request like this, you have a few options. Obviously you can say ‘yes’ or ‘no’ but you can also say ‘yes, but not right now’ – and you could even say ‘I can’t give you this rise, but I could give you this, this and this as an alternative’. At the end of the day, you should know your employee quite well – so you should know what will make them happy. It could be that they’re just feeling undervalued and under appreciated – so alternative benefits like an extra couple of days holiday or a bonus could be enough to make them stay.

7. Consider A Progress Plan:

If you do value your employee and would like to give them a pay rise but can’t necessarily afford it straight away, one idea might be to consider introducing a progress plan. So for example, you could say “I’m willing to give you the raise you asked for in three months if you can show me evidence that you’ve done A, B and C.” This gives your employee something to work to and gives them an incentive for working hard. What’s more; it also sends a message to your other employees that you’re not willing to just dish out pay rises here, there and everywhere.

8. Consider Introducing Official Pay Reviews:

If you are expecting a flood of pay requests, it might be worth introducing official pay reviews to try and manage the process a bit more professionally and efficiently. If you introduce half-yearly or yearly pay reviews, you can manage your employees’ expectations a little bit more – and it means that you shouldn’t really be hit with any more unexpected pay rise requests.

It goes without saying that at the end of the day, the right decision will ultimately depend on your business, your budget and the employee in question – but hopefully these points should help to give you some idea of what you should do and consider next time an employee asks for a pay rise out of the blue.

Do you agree with these points or think I’ve missed anything out? Leave me a comment below.