What to do when an employee asks for a raise?
If you have recently started your business, you may have some difficulties in managing issues related to personnel. One of the most complex points is when a person believes that they should be paid more, and therefore asks for a pay rise. Here are some clues to these situations.
Have clear market salaries
The first thing to know is how much to pay your employee and what they would expect if they were working for another company. There is no exact number, but you can get an idea by talking to contacts in other companies, looking at job ads or having a conversation with a recruitment agency. It is important to know as a starting point if your employee is claiming under or above the average wage, or if your salary is the usual amount.
Listen to your employee
Before making any decisions, take your time in a long conversation with that person. Hear what they have to say. Chances are, their main motivation for asking for a raise is the money, but they may have other issues that maybe you can easily fix. If you cannot offer a raise right now, improve other aspects by sitting down and chatting with your employee confidentially.
Analyse all aspects of the situation
What can happen if you accept the pay rise? There may be a domino effect with other employees also asking you for one, which may or may not be fully acceptable in your budget. On the other hand, if you do not agree, you may find that your employee will be discouraged, or even decide to leave to another company. No one is indispensable but some people are more necessary in an organisation than others, and may have an impact.
Never give in to blackmail
One of the arguments that you can find in these situations is that if you do not give the increase, the employee will leave. This can also be interpreted as blackmail. Usually yielding to this type of confrontation is not very helpful, because you can give a person the feeling of omnipotence, which can generate more conflict in the future. If it reaches a breaking point like this then it is better to let it go.
Is it deserved?
If you ask for a raise, maybe it’s because you have failed to reward those who are more committed to your business. It’s hard to be objective in these matters, but look at the work achieved by each, and seek to give raises to those who really are providing value to the company. If they see that their work is rewarded fairly, it`s an incentive to continue on that positive line, and peers may also become more motivated.
Looking for alternatives
If giving an increase right now is too risky given the financial situation of your company (very common in businesses just starting), look for alternatives to reward those that deserve it. For example, you can think of basing it on the results of the company or having strategic objectives incentives. In some cases, with key employees, you can even imagine sharing the capital of the company. In this way, everyone works toward the same goal: increase the value of the company.