How to give a pay review and not get taken for a ride – conducting pay reviews might seem straightforward. Your employee requests a pay review, you arrange a meeting, they put forward their case and after careful consideration, you make a decision and communicate it.
- Preparation
- The Review
- Awarding a Raise
- Declining a Raise
Preparation
But there is more to pay review than this. You can make your employees happy and ensure you aren’t taken for a ride along the way. Whether the pay raise is accepted or rejected, you can make sure your employee continues to work hard after your decision has been made.
Pay reviews give you the opportunity to reward and incentivise. Your employee may have shown significant improvement or their job responsibilities may have exceeded their original job description. Alternatively, they may have underperformed or have had disciplinary issues. Whatever the case, the review will be based on company and personal objectives and whether these have been met in a specified timeframe. After you have agreed to the review and set a date, there are a few things you can do to prepare for the meeting:
- Research the market value of the job by talking to your HR department, recruitment consultant or checking the appointments pages or salary surveys on the internet
- Analyze your employee’s progress by referring back to past performance appraisals and pay reviews
Compare the objectives and goals set with his actual performance - Don’t rely on performance for the immediate past – check that he has been consistent and enthusiastic throughout the entire period since the last review
A few questions could help you analyze his progress:
Has he taken on extra responsibility, put in extra hours?
What special projects has he implemented?
How quickly has he responded to special requests and urgent tasks?
Is he professional in appearance and manner?
Has he brought added value to the company by applying useful skills or saved the company money in some way?
The Review
Hopefully, your employee will come prepared for the meeting with a justification as to why he thinks he deserves a raise. If he comes without a clear focus, it will be up to you to take control of the meeting. Clarify current salary and the salary he would like to earn. Do not make any promises at this stage, especially if you have to confer with another party such as the finance director or personnel department. Ask your employee why he thinks he deserves the raise .If he is stuck, you can cover the areas you researched before the review, asking him how he believes he has exceeded his original job description or objectives. Ask him to show evidence of his claims in order to validate the justification. Listen and write down his answers for you to refer to later. Keep the meeting light and positive, it can be daunting for the employee.
Outline the next steps of the procedure – you may want time to consider the claim further, or speak to colleagues – and give a commitment, if you can, as to when you should have an answer. Arrange another meeting for this.
During the interim period between the review and the final meeting, go through the points raised in the meeting and consider whether the employee’s request is justified (sooner rather than later). You may feel that their request is reasonable and deserving. You may want to meet them halfway, or refuse the request altogether. It’s often more cost-effective to retain your current member of staff (unless they are proving to be counter-productive) than it would to hire a new one. Work this out. It could be more beneficial to pay the requested raise than to find yourself with a disgruntled employee who will soon decide to seek his ‘worth’ elsewhere. People can become disheartened if they receive a salary they feel is below their worth, and can cease to be motivated. What are your priorities? Think about the medium and long-term consequences of your decision.
Awarding a raise
Granting a pay raise that you know will go down a storm can be incredibly cheering. However, it’s vital to ensure your employee continues to work hard! If someone asks for a decent raise, and receives it straight off, there’s a real danger he may become complacent and lack the drive to continue performing well. While in the review itself, if you know you are ultimately going to give your employee what he wants, then before you inform him, stress the importance of earning his pay. Talk about the need to maintain high performance standards. Maybe set higher future targets. Try to provide fresh projects or responsibilities to keep him motivated. You could bring forward a performance appraisal to show your continued interest after the pay review. Then tell them.
Declining a raise
Refusing to give someone the pay raise he has requested can leave you and your employee feeling unhappy. It seems difficult to determine the best course of action. If you are turning down the request because you feel it is unjustified, and the employee walks away feeling dejected, he may just decide to up and leave. Without capitulating, you must weigh whether the cost of hiring and training someone new would be better than paying the raise. Or, while declining the request, encourage your employee to stay. Explain carefully and diplomatically how he can improve and how you can help this improvement. Reaffirm his worth to the company and if necessary, set a date for a revaluation. Throughout this period, provide support and offer advice in order to keep him on the right track and stay motivated and loyal to the company. If your encouragement pays off, you’ll be more than happy to award a raise at a future date.
What if your employee reacts negatively to your decision, or threatens to leave? Remember why you made the decision in the first place. It’s a little like job candidates handling counter-offers from their current employers when handing their notice in. If you change your mind and award the raise after all, in order to placate your employee, will the reasons you originally turned down the request remain? Chances are, yes. Stick to your guns. Trust your judgement. That’s why it’s imperative you consider the implications before delivering your decision. If you really feel the raise is not warranted, but can do without the hassle of recruiting and training, perhaps a nominal raise as a ‘gesture’ might do the trick. It may be your employee had no idea he was not performing to the standards he thought. A little bit of direction might turn him round, and turn a negative situation into a positive one.
Pay raises should not be begrudged. A pay raise is not just in recognition of past achievement, it’s an investment in the future and in staff retention. It makes your employees feel valued, appreciated and keen to develop their careers within your company. This in turn motivates them to perform better.
