When it comes to salary negotiation, often employers are unaware of the employee's thoughts toward their pay until they receive a knock on the office door.
Knowing how to negotiate a pay rise goes both ways. If you are a manager, it is important to know how to be prepared for such requests, as how you respond can be the difference between retaining and losing talent.
Here are five ways to address an employee's request for a pay rise:
1. Treat a pay rise request seriously
A common reaction to negotiate a pay rise request is to deflect the conversation for another day. However, even if the question comes as a surprise to you, it doesn't mean you should act on impulse.
It is important to treat any pay rise request seriously. Take the time to assess how much the employee is currently being paid, and the added-value they are bringing to the company. Listen to your employee for their perspective on why they are deserving for an increment to their salary before casting any immediate judgement. It is fair to ask and assume that the employee will have prepared their thoughts on why they would like a pay rise.
Additionally, establish the parameters around the role and your own expectations, making sure the employee understands what is required to earn higher pay.
2. Negotiate a pay rise with transparency
Asking for a wage increase is a stressful event for an employee. In rare cases they may have built up a bank full of grudges and grievances about not being recognised before asking for a raise, and their emotional state during the negotiating process can be fragile.
For both the employer and employee, it’s best to conduct salary negotiations when neither party is emotional and with full transparency. To help remove the emotion, many organisations offer regular performance-monitoring systems, such as a six-month performance review, where both employers and employees can prepare for and discuss salaries in relation to work. Alternatively, granting annual bonuses in return for completed KPIs is another way the employees can feel rewarded financial for the work they have performed.
That said, there are times when a salary review isn't possible within the formal review process and managers should indicate to employees at that time if it's the case.
In large companies in particular, there are often restrictions during a pay review process, so any salary raises are influenced by external timing factors. Employers should look to schedule these meetings at an appropriate date.
Having a regular and transparent process with regards to salary increases will help manage the build-up of emotion.
3. Consult a Salary Guide
Make sure you understand what the standard for the employee's role is in terms of pay before you negotiate a pay rise.
Comparing the employee's position with a Salary Guide can give you a solid foundation to negotiate. In some cases, an employee may not know what they are worth and they may already be receiving a wage above the industry midpoint.
Using a Salary Guide can help with discussing an employee's pay rise request. Likewise, contact a recruiter or your HR representative for advice on the current salary benchmarks before making a decision.
4. Review the employee's past performance
When it comes to pay rises, past results can count more than promises of future performance.
An effective way to negotiate a pay rise request from an employee is to critically assess their performance with the organisation thus far, both on an individual and team level. As salary increases are often competitive and rewarded for outstanding performance, it is also important to assess whether the employee has been going above and beyond in their role, or simply fulfilling their contract responsibilities.
5. Offer an alternative to more money
Often an employee asks for more money because they feel they are worth it or feel they have not been recognised for their hard work.
If the company is not willing or able to negotiate a pay rise, then offering employee perks could be a better option. These could include allowing the employee more flexible working hours, training, or a new position where they feel their skills can be better developed. It's worth keeping these alternatives on the table during negotiations.