When your Employee asks for More and your Answer needs to be No
The third in a series of three articles designed to help Manager's manage an employee’s request for a pay raise.
Most bosses are good people who genuinely care for their employees and therefore prefer saying yes more often than no. It’s also much easier and more rewarding for any boss to give an employee a raise. There will however, be situations when you can’t.
When to Say No without without feeling guilty
No is appropriate when you can’t substantiate a raise through increased complexity, responsibility, results, skill, productivity or performance
No is appropriate when you genuinely can’t afford it.
No is appropriate when the request is based only on length of service. “But I’ve been here 6 years” It’s important to recognise and reward loyalty but don’t pay people more who don’t do more.
And No is appropriate even when the employee is doing a great job.
Yes, really.
Let’s recap the 4P Principle: Position, Person, Performance and Pay
As an employer you create a job to fulfil a need within your business. The job exists to deliver a service and specific results. The job will dictate the span of responsibilities, qualifications, skills and experience to achieve this. It is “valued” according to these factors and those operating within the wider job market. Very simply, supply and demand.
You then appoint the person to this position and pay them according to their particular skill, experience and performance.
The confusion arises however when the employee, over time, progresses to the point where they are fully competent and fulfil all aspects of the role. They expect to receive pay increases just as they have each and every other year.
The reality is the employee shouldn’t receive any further increases to their base salary other than incremental adjustments to reflect inflation.
But why not pay them more when they are doing a good job?
By continuing to increase the employee’s base salary you will find yourself paying a premium and setting a precedence that could send your payroll spiralling and your profits plummeting.
You need to consider adopting a different approach when dealing with the employee who is performing well but over time has simply outgrown their job.
In this situation your options are:
Reconfigure the job to expand its scope and responsibilities and therefore its value and remuneration (but only where this would add real value not just cost to the business)
Retain the job in its current form and redeploy the employee within the company to another position with more scope
Retain the job in its current form and front up to the fact that where you don’t have an alternative position; the employee will need to find a job with another company.
Recognise the employee’s performance through one off bonuses or other rewards, which don’t increase their base salary (thereby inflating the value of the position)
Where you decide to retain the job and the salary in its current form, work through this with the employee and carefully explain:
Their job is designed to fulfil a specific need within the business and so the salary for the position is based on this.
They have developed and grown but have now “topped out” in terms of skill, experience and salary for the job.
They can either choose to remain in the position with inflationary adjustments to their salary, (and bonuses if you can afford them) or pursue another position at a higher rate of pay.
When an employee understands the situation and chooses to remain in their current position (as some do) then their expectations are more realistic. There is less likelihood of a decline in their performance, comittment or job satisfaction.
Pay for the Person
However, if you're a smaller company you are likely to have more flexibility and discretion. You can balance the cost of a higher salary compared to the cost your employee’s lost commitment or replacement should they resign. If this is the case, then you can step outside the job description, ignore the job market rate and choose to follow "Pay for the Person". Whatever your decision one last word of caution, test your decision against this proven wisdom: Only do for one what you would do and could do for all.
Related Articles:
Introduction The Boss's Guide to Employee Pay Raises
Article 1 Five Fundamentals of Managing an Employees Request for a Raise
Article 2 Four Pitfalls to Avoid when an Employee asks for More Money
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