By the book |
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How to handle a pay rise request |
Whether it comes as part of an annual review or out of the blue, a pay rise request can take employers and managers by surprise. To minimise the potential for conflict, businesses should have a well-understood process they can default to immediately. |
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1. Stay neutral and make time |
Most employers know enough not to blurt out, "You want what?"' and "I'd like a pay rise too," when put on the spot by an employee's request for a wage bump. But try to be aware that in the moment, even if your mouth isn't saying it, your face and attitude might be communicating the same message loud and clear. |
Take a beat and respond with an acceptable go-to emotion: curiosity. Assure the staff member you want to discuss it further, but also want to ensure you both have the time and space for a full discussion. Arrange a suitable time as soon as possible. |
If the request comes as part of an annual review, it should have been anticipated and may be able to be discussed on the spot. (Before any annual payroll reviews, managers and employers should have prepped the points in step 4, below.) |
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2. Why now? |
Most people find it extremely uncomfortable to raise pay issues, so something will have triggered this request and it should be taken into account. The reasons staff ask for more pay include: - They're finding it hard to make ends meet. This is particularly common at the moment. How does their wage growth over recent years compare to inflation?
- Their skills or responsibilities have increased.
- Their stress or workload has increased to a point they're wondering if it's worth it. This is not often sustainable - even with more money. Think about whether addressing overwork/stress could be part of the answer, rather than money alone.
- The company has been making larger profits and they want a greater share for their contribution.
- They may have found out another staff member's salary and feel undervalued by comparison. Changes to workplace laws at the end of 2022 banned pay secrecy and allows employees to ask colleagues what they are paid (although colleagues have the right to refuse to answer).
- They may have received another job offer and are weighing up their options.
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3. The meeting |
It doesn't need to be overly formal, but a meeting to discuss salary should be treated with importance and held out of earshot of other staff. |
At this stage, employers should do more listening than talking. Take notes but don't make a decision on the spot or indicate your opinion one way or the other. This is purely to gather information about why the employee feels they deserve a pay rise. |
At the conclusion, let the employee know when they can expect a decision and schedule a follow-up meeting. |
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4. Deciding factors: |
- Consider the employee's pay in relation to both colleagues within the organisation and comparable roles on the open market. Salary benchmarking tools available via employment and recruitment websites can be particularly useful. Search job sites for current listings for similar positions - no doubt your employee will already have done this.
- Once you've broadly benchmarked the job, employers need to consider what their staff member brings to the role over and above others who could fill the same position - perhaps they speak a second language; have a positive attitude; are pro-active; are a quick learner or happy to pitch in when needed.
- Be aware staff can and will compare notes on salary. Pay particular attention to any gender pay imbalances and ensure they are solely based on position and performance.
- What is the risk this employee may walk without a pay rise? Would other changes (to workload or other staff members who may be causing issues) help limit the quantum of the rise requested?
- Would they be hard to replace? And would a replacement require a lot of training to get up to speed. Could this cost as much as granting a wage rise? To evaluate this, consider current skill shortages in your industry and an individual's strengths and weaknesses.
- Can the company afford a pay rise? It may be a reality, but will not wash well with staff who are eyeing another job.
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5. Delivering the decision |
Both good and bad news should be delivered privately. |
If you decide to grant a wage rise, be clear about why you are doing so, to reinforce the qualities you want to reward. Set out how you would like this staff member to continue to contribute in future. |
Similarly, if you are delivering bad news, explain how you came to the decision. The key here is to outline a path forward. How can this employee learn and improve? What should they focus on to be successful next time? |
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It's always the quiet ones |
A final word about the ones you have to watch, according to the old saying: the quiet ones. One of the worst outcomes for an employer is to lose a valued staff member who has not given you the chance to retain them. |
Some employees will simply look for another job and walk. To prevent this, be sensitive to warning signs good staff are not feeling valued, such as lack of engagement, reduced productivity or initiative or an increase in absences. Ensure they know they are valued and managers are keen to discuss and address any issues they have. Always conduct exit interviews with staff. They can help highlight any systemic issues. |
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Please note your broker and Australian Finance Group Ltd does not provide financial product, tax, legal, or accounting advice. Any information contained in this document is of a general nature only and does not take into account the objectives, financial situation or need of any particular person and is not intended to provide, and should not be relied on for financial product, tax, legal or accounting advice. Therefore, before making any decision, you should consider the information with regard to those matters and consult your own financial product, tax, legal and accounting advisors before engaging in or considering the appropriateness of any transaction. The information provided above is specific to the particular situation described and individual experiences and results may vary. Past performance is not an indication of future performance and no representation or warranty is made that the information contained above is appropriate for any particular circumstances or indicates that a particular course of action should be followed. |
