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How to reply to salary review requests

As a manager or HR professional, the first clue to an employee’s intentions may be a request for a meeting.

Whether you are expecting someone to ask for a pay rise or not, if you are a decision-maker, don’t rush into a decision. If the company has had a tough year financially, you may be tempted to say ‘no’. Equally, you are likely to be unable to say ‘yes’ immediately because you may have to consider the impact on budgets and the potential for other employees to come forward with the same request.

Here are some tips for how to manage this situation.

Engage with the employee

For some employees, asking for a pay rise can be nerve-wracking, and they will have spent some time thinking about what they are going to say. Listen to the employee, acknowledge their request, and book a formal meeting on an agreed date to discuss the request in more detail.

Ask them why they expect or think they deserve a pay rise; an employee will often equate their salary with how they perceive the company values them, or with how important they feel they are to the company’s success. This means a salary request is linked to an employee’s motivation and engagement with their role and with the wider company.

This is also an opportunity to discover if the employee has discussed their salary with a colleague in a similar role and has found out they are being paid more.

Consider also that there may be changes in the employee’s home life that mean they need to ask for a higher income.

Be sensitive to cultural differences when discussing money. For some nationalities it will often take courage to address the issue of a pay rise, while for others it is more common to be open about how much they earn.

What is your policy?

Be honest about the company’s position and the likely decision. How you proceed will depend largely on your company’s policy towards pay rises. If there is a policy, make the employee aware of it. You can then frame any discussion in this context.

If your company carries out regular appraisals and performance reviews, you can use these to assess performance against expectations. If the employee feels their work is deserving of an increased salary, you can use performance against agreed goals in your decision-making process.

What is the value of the proposal?

Before your formal meeting, take stock of the salaries within your company for similar roles or formal pay grades, and industry standards. Perhaps you are paying the market rate already or above? Perhaps you need to look at salaries across the company in greater detail?

Take time to consider your justifications, whether for granting a pay rise or rejecting it. Remember, that whatever the outcome, an employee’s motivation and engagement will be affected whatever your decision. If the company is unable to justify the pay rise, consider the impact on the employee and what they may do next.

What are the alternatives?

Your company might not be able to afford a pay rise, or might have a policy that dictates they only happen at certain times or under certain conditions. If so, consider what alternatives you can offer to maintain staff motivation.

For example, learning and development opportunities are highly valued by ambitious employees. Consider offering paid time off for training as an alternative to a pay rise. This motivates the employee and looks good on their CV, while the company benefits from increased engagement and improved skills that will both result in improved performance and offer a tangible return on the investment. 

The final decision

Once a decision has been made, you will need to let the employee and all relevant stakeholders know the outcome. Be honest and clear, and explain your reasons. If you agree to the pay rise, confirm the new salary and when it will begin. If you decide against the pay rise, offer alternatives if possible. If during the pay request you identify gaps in knowledge or experience, or room for improvement, then agree on a progress plan and consider employee training. Set realistic targets and confirm a date when you will look again at the employee’s request.

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