Managing salary requests isn’t straightforward – in fact, it can be somewhat awkward, especially if you already work with fantastic teams of talented people.
Unfortunately, many employers tend not to accommodate the needs of their workforce. Instead, they find ways to decline pay rise requests, which can backfire and hurt the organization, leading to:
- Lower morale
- Lower productivity
- Higher turnover
According to a PayScale study, just over two-thirds (69%) of employees who were denied a pay rise indicated they’d seek new jobs elsewhere within six months.
While some would argue that increasing wages could lead to job losses, other sources indicate that a pay rise could actually prove beneficial and boost productivity and happiness at work.
Employees will always be one of your greatest assets, so how do you prevent them from seeking new jobs elsewhere? Give them what they want—a pay rise.
Here’s why you should give employees a pay rise:
1. They’re young and not afraid to switch jobs
Job loyalty is on a steep decline in the US because younger employees tend to job hop a lot more than older workers. The average tenure at a company is much shorter than it used to be.
That situation has led to a significant shortage of talent in many companies. At Resume Genius, we seek to encourage employees to stay by offering frequent salary increases. We offer a sliding scale of rises:
- 1% rise at 6 months
- 2% at 12 months
- 3% at 18 months
This increases until employees reach a cap of 6% at 3 years.
Since implementing this rise system a year ago, turnover has fallen, to such an extent that not a single employee has left in the past 6 months.
Samuel Johns, HR Specialist and Hiring Manager for ResumeGenius
2. They’ve made a strong case for a rise
A good employee knows their worth. If they feel undervalued and can make a strong case to their seniors, then they’re deserving. Having the wherewithal to stand up for yourself and throw your hat into the ring is a prized quality. It’s this type of innovative and proactive outlook that’s infinitely valuable in a company, and those are the types of people who climb the ladder successfully. Never underestimate the courage it takes for an employee to go to their higher-ups. As a senior manager, it’s easy to forget how intimidating the boardroom can be for entry-level workers. It’s impressive when a staff member is forward-thinking enough to step out of line. Obviously, there’s an element of discretion to this rule. Big-headed employees whose mouths are louder than their worth will also commonly ask for a pay-rise. However, it’s pretty easy to identify who’s deserving and who’s getting too big for their boots.
Laura Fuentes, Operator of Infinity Dish
3. They’re fair and loyal
I’ve managed and developed teams for over 10 years and have given pay rises to employees when asked and also when not requested.
There are two reasons to reward your hard workers and high performers; fairness and loyalty. I ask a lot of my team at times and they go the extra mile to get things done. Being situated in APAC means we have ridiculous working hours. They’re often working from 5am and, in some cases, through to midnight. Loyalty works both ways and if you’re not willing to go the extra mile for your team, they won’t do the same for you. Sometimes that means pay rises or trying something new at work, but if you’re not willing to reciprocate, then you lose that loyalty, and quickly.
I also believe that you have to be fair to your team. We’ve all come up against and struggled with low pay, devious bosses and horrible pay structures that limit you to <5% per annum. But I like to try and do what I can. I recently increased an employee's salary by 15% outside of the annual review process and he’s been a stellar performer both before and after the pay rise.
Ajmal Dar, Global Manager at Amazon Web Services and Founder of Moccasin Guru
4. It costs more to hire a new member of staff
Managers should be building pay increases into their compensation package and engagement strategies. You should consider a pay rise to retain your top performers. Only give rises if they fit feasibly into your budget, but when deciding this, consider the costs if one of your top performers decided to leave. Once you factor in recruiting, onboarding, and training a new employee, plus lost productivity while they’re brought up to speed, you can easily make a case for a pay rise.
Verbal recognition and positive feedback shows that you appreciate and acknowledge your employee’s hard work, but giving them a rise indicates that you’re as invested in them as they are in their role. You’ll see a positive return on this investment in terms of the value of their continued efforts, once they realize there’s a tangible benefit to their output of quality work.
Shannon Braun, Career Strategist at Public Safety Resumes
5. It’ll boost employee engagement and help you achieve your goals
Giving a pay rise can boost employee engagement. An Gallup study found that 85% of people are disengaged at work. I’ve found that this can be caused by hard workers being overlooked. Since disengagement costs $10,000 per $60,000 of salary, a rise can save the company money in the end.
If a pay rise isn’t possible, a merit bonus could be an alternative solution. A merit bonus can help the business reach targeted goals. It’s unwise to give out bonuses randomly. Set clear goals for your company and when an employee helps to achieve them, such as acquiring a certain amount of monthly website visitors, give them their reward.
Tim Reitsma, Sales and Operations Strategist at People Managing People
6. Employees are serious about progression
Senior managers should give rises to employees who take ownership of their position and act as a partner with the company. I’m more interested in growth and outcomes than time on the job. Loyalty is great, but it doesn’t move the company forward.
When employees take on more responsibility and do a great job, they should receive an increase. A few years ago, I created a Promotion Plan that outlined the ideas I had to help the company—taking the time to write down my ideas made it easier to communicate my future value to the company.
Promotion planning has become the standard for asking for a pay rise or promotion at our company. Through this process, employees have to create strategies and implement projects that generate revenue, improve customer retention, employee satisfaction, etc.
By associating rises and promotions with performance, employees know what to do to get to the next level. The plans also showcase past achievements, personal development, growth plans and communicate your career goals.
Through the promotion planning process, the most dedicated and driven team members get rewarded. The company grows, and the employee has greater satisfaction through working on meaningful projects.
Mary Guirovich, Founder and CEO of My Promotion Plan
7. It can empower your employees
Performance-based incentivization is fine, especially based on quarterly reviews. But now and for the foreseeable future, the economy is facing a serious downward trend. Employees will be worried about their jobs. They might not feel secure in their position and what the future might hold.
I’m not saying everyone deserves and should get a pay rise. But framing the conversation around this when giving out pay rises can provide an additional sense of relief, empowerment, and appreciation.
What a company shouldn’t do right now is withhold or delay any expected rises because this can seriously jeopardize trust in the company. Good people are hard to find.
Jonathon Wright, Management Consultant at QA Lead
8. Talented employees are irreplaceable
The most valuable asset of a company is its employees. Without proper training and management, these employees won’t be able to perform to their utmost, and this will affect the sales of a company. They’re the backbone of any business structure, so it's fair to say that the success of a company will depend on the people they hire. A pay rise won’t only affect the employee, but also the business.
When employees receive a pay rise, they’ll be more motivated to work. It’ll also inspire other workers to put in the extra effort so that they, too, will be fortunate enough to get a pay rise. It’s when employees are treated fairly can they care for the company. They’ll be loyal to the business and their manager for the treatment they’ve received. This is how you can get loyal employees that you trust. These kinds of workers are the most difficult ones to find.
Leonard Ang, CMO for iProperty Management
9. They genuinely need a pay rise
Personally, I give rises based on three things: tenure, performance, and need. As much as possible, I try to give an annual salary bump to my employees, and those who did a great job are worth taking note of to get a little extra. But if an employee comes to me and requests a pay rise because they need it, I won’t turn my back on it right away. If their situation calls for it and the company’s finances can accommodate, I won’t hesitate to say yes.
And for the most part, it does have a positive effect on employee engagement and performance.
Jack Wang, CEO of Amazing Beauty Hair
10. Increased productivity
Giving your employees a salary bump is a positive reinforcement for them. It’ll make them feel that they’re being appreciated and rewarded for their hardwork and contribution to the company; hence, it’d make them motivated and more productive.
Lewis Keegan, Founder & Writer at Skillscouter
11. Giving a pay rise to high-performers will send a positive signal to the rest
Employee retention is something businesses of all sizes and industries strive for. You don’t want your top talent feeling underappreciated and wondering if they’d be better served working for someone else. This is the primary benefit of rewarding strong work with a pay increase.
It also makes economic sense. If you look at the ultimate cost of hiring and training a new employee, it’s going to be much higher than whatever salary increase you’re offering. This employee’s work has allowed your department to grow and succeed, and they deserve recognition for their contribution. Showing that you appreciate and acknowledge their efforts increases the loyalty they return to you. They’ll continue to strive for excellence and will be less inclined to look elsewhere.
Giving rises as rewards for consistent strong performance also sends a positive message to the rest of your staff. Performance-based rises add motivation to turn in exceptional work since employees know they can receive a tangible award when they do so. Most people want to work for a company where they feel seen and acknowledged. Seeing co-workers receive this recognition demonstrates that they can receive the same with the right amount of effort.
Jon Hill, Chairman & CEO of The Energists
12. They’ll be less inclined to leave
The basic reason to give an employee a pay rise is that they’re someone you want to keep around. A pay rise shows the employee that you recognize their efforts, but it also gives them a reason to stay with you. Money matters.
When deciding to increase someone’s pay, I look at things like their annual review, their future with the company, their efficiency, and their ability to inspire the rest of the team.
These are all checkmarks on a list of “reasons to keep this person forever,” and if I want them to continue to work for me, I have to provide them with the incentive to stay. I remind myself never to become complacent and assume that good employees will stick around with no work on my part.
Employees who are rewarded for their work almost always beat their own previous goals and scores.
When you recognize your employee’s efforts, they’ll continue to make an effort.
Camille Chulick, Co-Founder of Averr Aglow
13. It can encourage healthy competition
You should use stats and metrics to make an objective view on employees and who are the prime candidates. For culture, personality and communication, you should ask prospective co-workers for their general opinions on them; they’ll offer a peripheral view that you weren’t aware of. Remember to listen to their work comments and stray away from who they like the most personally.
We had 2 positions available 6 months ago, but we told staff there was just one, and 2 prospects were given the role for an interim period, and the best performer would be given the role after the trial period.
This encouraged healthy competition and the performance from them both was outstanding. Instead of relaying there were positions available, we told them they performed so well that we couldn’t separate them, so we created another role.
This showed them and the rest of the team we’re open to great work, can be flexible and believe in our staff. It fosters teamwork and when we reran the process, they were helping each other rather than just competing.
Jase Rodley, Founder/CEO of Dialed Labs