How to handle pay rise requests
Good employees who do good work deserve good pay.
It should go without saying that you want to fairly compensate the people who work for and with you. Nevertheless, navigating pay rise requests can be a tricky proposition for even fair-minded and well-meaning managers and founders.
The rise of remote work adds another layer to what is already a complicated subject. The geographical and national barriers that once influenced how employees were paid are blurring and becoming less relevant.
That has led employees to change their expectations regarding compensation. That creates a need to take a more strategic approach to salary negotiation.
I’m the point person for managing pay and pension increases at Charlie, and I interface with Charlie employees about their pay rise requests all the time. One of my responsibilities is striking a balance between offering Charlie employees competitive salaries in a way that contributes to our long-term growth, and making sure the business can afford it.
I’d like to lend a little bit of what I learned, and explore how to handle pay rise requests that come across your inbox.
The complexity of pay rises
Negotiating a pay increase is like tip-toeing into a minefield.
For many employees, a pay rise is not just about the monetary incentive, but it’s a symbol of recognition and validation for their hard work. It acknowledges their value to the company.
The shift to remote work has also added another layer of complexity to pay rises. The flexibility and freedom offered by remote and flexible work options is such that more employees are agreeing to a pay cut for remote work roles.
Of course, you want to reward your hard-working team members and employees, but you have to work within the limitations of your budget.
It’s not your decision alone either. Pay rises involve input from the HR department, the finance department, and upper management.
Alongside balancing budgets, you’ll need to balance the feelings of your employees. Striking a fair balance is crucial for maintaining both your employee morale and your company’s financial sustainability.
What’s the legal framework around pay rises in the UK?
Here are some of the regulations concerning pay rises in the UK you’ll want to be aware of:
- Equality Act 2010: This act prevents pay discrimination based on gender, race, or other protected characteristics. It ensures that people are paid for the value of their labour, not for circumstances they have no control over
- National Minimum Wage Act 1998: This act requires employers to pay at least the national minimum wage. That ensures that all employees receive a baseline level of compensation for their work
You are not legally obligated to give pay rises. However, when you do give a pay rise, you have to follow these laws to avoid legal consequences.
How to fairly evaluate a pay rise request
When an employee comes to you with a pay rise request, you should respond tactfully, artfully and fairly. Here are the steps you can take when going through this process:
- Assess the employee’s performance: Measure their performance against the KPIs you set. Employee performance review records are important here to determine whether the employee’s work justifies a pay rise
- Consider budget constraints: Examine the department and overall company’s financial health. Can you afford a pay rise? Is it in the budget? Balance employee rewards with company financial stability
- Evaluate market rates: What are other people making who do what your employee does? Look at industry benchmarks and salary surveys and look at whether you’re paying them the market rate
Are you just getting started with performance management? You may want to consider a small business HR software like Charlie to help you manage review cycles and assess your team’s performance fairly and efficiently.
With Charlie, you can:
- Pick and choose from expert-build performance review templates
- Launch recurring performance review cycles in seconds
- Collect 360 feedback, to make your performance assessments fairer and more complete
Start a free trial of CharlieHR today!
The importance of fairness and consistency
However you decide to handle your pay rises, whatever rules you set, you need to make sure the same rules apply to everyone.
Having a transparent grading or scoring system will help make sure all your employees and team members are evaluated based on the same set of criteria.
Create a standardised system, and communicate it clearly to all your employees. Spell out how performance is measured, what criteria they’re evaluated on, and how the factors are weighed out.
How we handle pay rises at CharlieHR
The way we approach pay rises at Charlie is tied to our overall HR strategy and the same ethos guides it. When negotiating pay rises, I try my best to balance fairness, transparency, and performance-based rewards.
- Twice-yearly performance reviews: We conduct performance reviews twice a year. These serve as the basis for any decisions about promotions and pay rises
- Promotion-based pay rises: Pay rises are linked to promotions at Charlie. Employees only receive a pay rise when they have been promoted. That way, all pay rises are merit-based
- Salary transparency at different levels: Salary transparency is a key value at Charlie. Two employees, at the same level of seniority, who do the same job, will get the same pay. The system is fair, it’s clear, it’s known to everyone
Communicating pay rises
Communicating your pay rise policy is how you make it fair and balanced. Everyone who works at your company should know what the rules are.
When you negotiate a pay rise request with an employee:
- Prepare: Gather all the relevant information you need, including performance data, budgets, and any company policies that pertain to the decision
- Have a script: A script can help guide the conversation. Focus on acknowledging the employee’s contributions. If the request is denied, tell them why and offer feedback. Be empathetic, and understanding, especially if you have to disappoint them
Alternatives to pay rises
In a perfect world, every employee who deserves a pay rise would get one. Sadly, we don’t live in a perfect world. Small businesses have limited resources and only have so much to work with.
In place of a pay rise, there are alternative incentives you can offer instead:
- More vacation days: Give your employees additional time off as a way to reward them without dipping into your pockets too much. It shows your appreciation and gives your employees a chance to recharge
- Learning and development opportunities: Skill-building opportunities and pathways to professional growth speak volumes, especially for people who are changing roles (i.e. moving to a managerial role from being an individual contributor)
Charlie can help your pay rises pay off
If you’d like some hands-on guidance on how to navigate your pay rise negotiations, I or another HR advisor at Charlie would be more than happy to help. Book a free call today, and we’ll help you get your pay rises sorted.