What To Do When Employees Want Higher Pay

Developing a competitive salary structure is an essential element to consider when running a business. A strategic compensation plan has numerous benefits, such as reducing costs linked with recruiting and retaining staff and improving morale and productivity among employees. Despite having a competitive starting salary, your employee may ask for higher pay later. Here’s what to do when your staff is asking for a raise.

Provide performance history

A salary increase is one way of showing your employees appreciation and acknowledging their contribution to the company’s success. Employee performance history has two primary purposes: evaluative and developmental. The evaluative purposes are used to inform staff of their performance standing. The collected performance data are frequently intended for rewarding high performance and improving poor performance. The developmental purpose helps identify problems among employees. The performance data gathered are used to develop skills training and other interventions.

Acknowledging the employee’s request for higher pay is vital to encourage them to stay in the organization. If an employee has an outstanding performance history, jumping ship would likely be easy, especially when the other party offers a higher salary. Offering an increase can help to ensure their loyalty and sustained commitment to your team.

Suppose an employee succeeds in overcoming a significant challenge or contributes to a successful project. In that case, a pay raise could be the best way to show your appreciation and set an example for how you treat employees who exceed expectations.

Be fair

Being fair and equal is a critical element when offering salary increases. Providing higher raises to already higher-salaried employees or allowing bias to influence your decisions can cause disagreement and conflict among your employees.

Remember that providing fair remuneration isn’t just crucial for morale. In many cases, laws require you to pay employees equitably.

With that said, establishing a set of guidelines for defining raises can help to reduce the influence of personal bias. It also ensures that all management team members responsible for determining pay increases are applying the same criteria to evaluate employees.

Make your decision based on facts

After discussing with your employee asking for higher pay, do your due diligence. To determine how your employee’s salary compares to their co-workers’, you can conduct a pay audit. An internal pay audit compares employee positions, academic background, experience, length of service, and pay. By comparing these factors, you can verify that your raise review process is fair. 

Researching what businesses are in your area and industry pay may also help you arrive at a favorable decision. Look at posted job descriptions to compare your employee’s duties, skills, and requirements. Aside from the BLS, you can use other guides like PayScale to help you determine whether your employee’s current pay is fair. 

Consider alternatives to higher pay

If you cannot afford a pay raise but want to show appreciation to an employee, you have other options. Consider offering a pay raise alternative such as a bonus, more paid time off, or a flexible work schedule. 

Many employers choose to pay bonuses to employees rather than raises. The Wall Street Journal found that, between June 2017 and June 2018, companies spent 3% more on benefits and only 2.7% more on salary costs. A one-time bonus may directly cost you more, but it can save you money in the long run.

You can also satisfy an employee’s higher pay request by offering them more paid days off from work. A study shows that 80 percent of employees would consider choosing a job with more vacation time over a higher-paid position.

Flexible work scheduling may include allowing an employee to adapt their work hours. Or, it could also have work-from-home options. Before offering this alternative, though, consider whether your business is equipped to accommodate flexible scheduling.