Part 2 The Bosses Guide to Pay Raises

Four Pitfalls to Avoid when an Employee asks for More Money
The second in a series of three articles designed to help Manager's manage an employee’s request for a pay raise.

1. Quantity Vs Quality of Work

Often an employee will ask for more money because their workload has increased. They are working harder and longer hours so feel stressed, pressured and overworked. “I’m not paid enough for this!” and so they ask for an increase in pay. It’s a reasonable reaction but paying more may not be the long-term solution. 

Unless you address the root cause for the heavy workload then it’s only a matter of time before the stress and pressure will nullify the satisfaction of their pay increase. There is nothing more certain that if the heavy workload continues they will be back asking for more, or worse still they’ll leave. 

So what do you do?

First recognise and appreciate the employee’s extra effort eg bonus payments, gift certificates, time off

Then assess work levels.

What is the cause for the increased work level? Is it temporary or is it likely to continue? If it’s the latter, then consider investing in process and system improvements to streamline workloads and/or increasing staffing levels. These actions will prevent burnout; improve your overall quality, service delivery and staff morale. It’s a smarter and more profitable long-term solution than just paying overworked staff more money.

2.  Countering Counter Offers

When an employee approaches you with a request to counter an offer from another employer then unless you really can’t afford to lose the employee at that point don’t get caught in the game. It’s expensive and research shows that most people looking for counteroffers end up leaving anyway.

Instead of creating an all-or-nothing situation, explore why your employee applied for the position in the first instance. On occasion you may find they really don’t want to leave so you may be able to meet their needs on another level. If however money is the primary motivation and you can neither justify nor afford to match their new salary then explain this clearly and wish them well for the future.

2. Increased Pay for Increased Personal Needs

New Zealand’s ongoing love affair with real estate and credit cards means our level of personal debt is increasing so more of us need more money to fuel our standard of living. One of the most difficult scenarios is when an employee requests an increase because their personal expenses have changed not because they have done anything bigger or better.

Unfortunately some employee’s won’t state this explicitly so their request will be camouflaged with statements regarding workloads, length of service and increased responsibilities. Once again you need to test the substance of their request by working through the 4P process or coaching them by using the CAR method.

If you are unable to establish any significant change in the job position, their performance or results and if there are no other job satisfaction factors missing then there is a strong likelihood you are dealing with one of two issues, their personal financial needs or their personal criteria for success (See No 4).

It’s not easy, but you need to communicate that their personal needs are not how you base your pay raises. (And where appropriate refer them to a Financial Planner or Budget Advisory Service)

4. Success, Status, Ego and Pay

Over time we develop criteria that determines what “successful” means to us. Our values, culture, age and stage of life, profession and how we derive our sense of self-esteem will influence the criteria on this list. And this list will influence our attitude towards our job, money, benefits and rewards.

In our working world there are employees whose personal definition of “success” is strongly connected to the size of their title, office, car and salary. Bigger is usually better.

When a request for an increase is based solely on these factors, no amount of logic or reason will resolve the issue. The employee will be operating from their internal “success list” and sometimes benchmarking their need for an increase against others who they perceive to have “more”.

They will not respond well to your rational explanation based on job size, market rates or your company’s ability to pay etc. They may even perceive your “no increase” as a judgement of their worth i.e. my value as a person is determined by the size of my salary.

You can’t reprogramme an employee’s definition of success or rewrite the criteria on their “success list” nor is it your responsibility so your options in this situation are:

Reinforce, where appropriate, their value to the company.

Focus on those factors you use to determine your salaries and increases.

Then develop a very specific action plan to fulfil these within their current position (The performance planning process) It wont thrill them but they are usually ambitious and driven so the payback will benefit both the employee and your company. 

Provide career planning so they can identify and progress towards roles within the company that fulfil the criteria on their personal success list.

Where you have identified that the employee is unlikely to fulfil their personal success criteria within the company, help them to map out a plan to accomplish this elsewhere. Bottom line they wont be happy working where they are now so it’s best (for both of you) that they find a position with a company that can more closely meet their needs.