Cash, bread, dough, … whichever term you use people are uncomfortable talking about money. Discussions about compensation can be one of the more difficult conversations between a manager and an employee.

Managers are faced with many tough situations in the workplace. How a manager responds will make the difference between a positive and less desirable outcome. Handling a request for a raise is complex. There are more factors involved than simply considering whether or not the employee deserves a raise. Changes in compensation have implications for the entire organization. Where will the additional money come from? Is there a budget for increases? How is the company performing overall? Would raising salaries be pragmatic given the environment? How will an individual wage increase impact the overall wage scale in the company?

The following best practices will help managers respond to a raise request and ensure the conversation runs smoothly. 

Common Pitfalls – Handling Raise Request

• Feeling pressure to respond immediately.
• Agreeing, or disagreeing, with the employee before checking the facts.
• Granting an increase for the wrong reasons. For example, granting an increase out of fear the employee may leave or because you know the employee needs the money.
• Granting an increase, but failing to set greater performance expectations to match the increase in money.
• Turning down a request and blaming someone else for the decision.

Best Practices – Handling Raise Request

• Consider the request carefully and take your time. 
• Ask for more information and listen. You want to hear from the employee why they believe an increase is warranted.
• Acknowledge that bringing forth the request took courage. Remember employees are equally uncomfortable discussing the topic of money.
• Tell your employee you will consider the request and get back to them.
• Take responsibility for the decision. Often managers discuss salary changes with colleagues or senior management. You may need approval before making any changes. Don’t be tempted to avoid responsibility by using statements such as “It is not up to me” or “I need to check with …”.
• Take the time to review the request. Consider the employee’s value and contribution to the organization. Consider opportunities for advancement, compensation level among peers and in the labour market.
• Prepare for the conversation by planning what you will say.
• Schedule a meeting.
• Keep emotion out of the discussion.
• Let the employee know you thought about their request.
• Treat the person fairly and respectfully at all times.

Reasons to Consider Granting a Request for a Raise

• The person is underpaid, either within your company or within the external labour market.
• Your top sales person who brings in the most revenue is asking for a raise.
• The employee goes above and beyond on a daily basis and brings a value to your team that cannot easily be replaced.

How to Say “Yes”

Get quickly to the point that you are pleased to offer your employee a wage increase. Make sure you explain the reasons for the increase with specific reference to the employee’s performance. Did the employee take initiative to complete a project, exceed your expectations, or take on new duties? Explain your expectations for the employee to add increased value in the future.

Reasons to Turn Down A Request for a Raise

• The person is an average performer.
• The job is not worth more money. All jobs have a maximum value. Even a top performing employee will reach a point where they cannot add any additional value to the role. At this point, it may be time to move the person into a role with more responsibility.
• Granting a raise would impact the fairness and integrity of the compensation system.
• The timing is not right financially for the company.   

How to Say “No”

It is never an easy discussion when you have decided to turn down an employee’s request. Get quickly to the point that you are unable to offer an increase at this time. Make sure to explain the process used to make your decision. Many people do not understand the compensation system. Back up your decision with facts. Make sure that you outline the importance of the person’s role on your team and point out their strengths. 

If you feel the person has potential to grow and add value, which could lead to increased compensation in the future, be sure to outline the opportunity and your expectations. The person may need to learn new skills, gain experience, take a course, take on more responsibility, show initiative, lead a project and demonstrate their added value to the organization.

There is always the risk that turning down your employee’s request will lead to their departure. Manage the discussion in a respectful and professional manner, while attempting to motivate your employee. Good luck handling raise request situations at your workplace.