How to Handle an Employee Asking for a Raise

What to do When an Employee Asks for a Raise

Many managers may feel surprised or even annoyed when an employee asks for a pay raise. Knowing what to do when an employee gives them an asking for a raise letter is important because salaries have such a critical impact on morale, retention, and even the manager’s career.

When considering how to respond when your employee asks for a raise, try not to blurt out the first thing that comes to your mind, such as “No way!” or “I guess so” or “It’s not my decision.”

Instead, try to keep your body language and your tone neutral and ask the employee to explain why they believe they deserve a raise. (Write it down so you won’t forget and the employee will see that you’re taking their request seriously.) Then, tell the employee you need to consider the request and will respond within two weeks.

Next, think about the employee’s performance and value to the organization. Does your research show that they’re exceeding goals? Taking on more responsibilities beyond their job description? Is expected to grow even more valuable as they gain more experience? Is their salary competitive and you’re providing incentive enough in order to retain them in your organization?

At the same time, you can’t give an employee a raise simply because they have excelled only on one project (it’s better to just give a one-time bonus) or because they want to buy a new car. When you give an employee a raise, think about how it will be viewed by the rest of the team. Will it be seen as fair? Will it cause every other team member to say, “But I worked hard on the project, too! I want a raise!”

Also, you can’t go beyond the bounds of the salary for that position (the company probably won’t allow it) and it can throw your entire team’s salary structure into disarray. Would it make more sense to move the employee into a different position that would allow a salary boost If you believe they would be a good fit for it?

You may also consider offering nonmonetary rewards instead of a raise or bonus. Perhaps the employee would value a flexible schedule, more PTO, additional tuition reimbursement or training, increased retirement contributions, childcare, or other perks.

Responding Appropriately to the Raise Request

When it comes time to communicate your response to the employee, you need to:

• Put it in Context.
  Even if you deliver the news in person (and always do it privately), you will probably want to write a raise letter to the employee so that your reasoning is clear and avoids any legal liabilities. Inform the employee about the specific dollar amount (it makes it more significant than just citing a percentage boost), the contributions that led to the pay hike and express appreciation for the employee’s work. You might say or write something like, “I thought about the request you made to reconsider compensation. After doing my research, I’ve decided that a compensation change is in order.”

• Be Honest.
  If your company tells you that a pay raise is not possible for budgetary reasons or because that employee cannot exceed the pay scale for that job, then communicate that to the worker. In the case of a federal employee raise, for example, that decision may be entirely out of your hands as the decision often rests with lawmakers. But if you’re a private employer and you don’t believe after doing your research that the employee’s performance merits a raise, be honest about it.

• Motivate.
  How you communicate a pay raise to an employee is important because it sets the tone for the employee’s future. “I always like to tell people that now the baseline goes way up,” says Karen Dillon, author of “The HBR Guide to Office Politics.” “You got it and I’m thrilled for you. But now you’re starting at this level. This isn’t a reward to sit back on.”

Managers can often be caught off guard when a pay raise is requested, but by asking questions, doing research and being clear on legal and company policies, the response to the employee can be fair and professional and help ensure everyone on the team believes they’re being treated fairly.

Find more insights and inspiration at LHH.