3 Things You Must Consider Before Giving an Employee a Raise
Your employees deserve fair compensation. Here’s how not to rip them off.
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I put in 10 to 12 hours a day, with only a short break for lunch. The labor was so grueling that my fellow shovelers would often quit the morning they started.
One afternoon, a lightbulb went off in my head. It occurred to me that I was a pretty valuable employee for Dollar Bill, and that a raise might be in order.
I asked him for one. He turned me down flat, and insulted me in the process. I moved to greener pastures soon after, and Bill lost a first-rate employee in the process, which ultimately hurt his business.
I've written in the past about how employees should go about asking for a raise. Here's some advice for employers on how to give them, and avoid being Dollar Bill:
1. Don't be cheap.
The thing that sticks most in my craw about Dollar Bill is not that he refused to give me a raise. It's that the moment I decided to move on, he got desperate and offered to match what my new employer was going to pay me.
If it had been a matter of a few dollars, it might not have bugged me. But my new employer was more than doubling my hourly wage. In other words, I had been worth much, much more than Dollar Bill had been paying me, and he knew it. I felt robbed.
Put yourself in the shoes of your employee. If, in the process of asking for a raise, they discover that they've been underpaid by a few percent, that's not necessarily going to create resentment.
On the other hand, if they're earning $50,000 and they get an offer from another company for $80,000, that's definitely going to create resentment. They'll believe--and rightfully so--that you were taking advantage of them.
2. Don't be unprepared.
It's scary to ask for a raise. It can also be scary to be asked for one. Most employees don't realize that their manager could be dreading the conversation as much as they are.
In fact, the manager is often the least excited of the two. They may have even been stressing about it beforehand, which is something an employee would not be aware of.
Let's say you're managing five people and your team is responsible for delivering a big project. If you lose one or two of those people due to dissatisfaction with compensation, your chances of getting that project completed will plummet.
Not knowing how the people who report to you feel about their compensation and the track they're on for their next raise can generate a ton of anxiety. Therefore, transparency and awareness is key.
It's up to you to know how much each member of your team is worth. It's up to you to anticipate when an especially hard worker might approach you about a pay bump.
A good manager will remove the anxiety by staying ahead of it. They'll proactively reach out to their higher-ups and say, "So-and-so is killing it, they're probably due for a raise, let's decide right now how we'll handle it when they ask."
3. Don't be overhasty.
This advice can be much more difficult to follow that it sounds. Being aware about who is or isn't satisfied with their compensation, and what to do in the event of a conflict, requires a lot of effort.
It's impossible to be perfect in this regard. Anybody can be taken by surprise. For example, an employee approaches you about a raise. You think you have a gut feeling about whether they're on or off regarding compensation, but you're not sure about the facts.
In that case, step on the brakes. Don't try to solve the problem in the moment. An improvised response is usually an imperfect one.
Get all the information you need. Visit HR and finance. Depending on the size of your company, you may have to get online yourself and do some research. With something as sensitive as compensation, you want to to be as certain as possible that you have the correct answers.
Keep in mind, too, that your employee isn't expecting an answer that very second. Get informed, take your time, but make a commitment as to when you'll follow up.
Finally, make freaking sure that you keep that commitment. Whether the news is good, bad, or ugly, deliver it when you said you would. When it comes to anxiety, or fear of the unknown, bad news is better than no news at all.