Written by Heidi Wadsworth | 15th February 2022

It has hit the headlines recently that average pay rises are failing to keep up with the cost of living.

As an employer, you may wish to increase your employees’ earnings to match price rises, but that’s not viable for every business, especially when things have been upside down for the last two years.

You may also have employees who expect pay rises to be in line with the rise of cost of living – so how do you deal with that conversation?

Here’s some advice for businesses on what do if your staff are asking for more money.

Do your research

Now is a great time to research the salaries and benefits packages available across your industry, so that as and when you get requests from your employees, you have already started the information-gathering process.  Know your market, because it’s likely your employees will be looking at this information too.

We are seeing in the headlines that people are moving to roles where they’re earning ridiculous money, but is that really happening in your industry? You don’t want to end up paying a salary twice or three times the average if that’s not what your employee would be getting for the same role elsewhere.

If you need support with this, we provide a comprehensive salary benchmarking service to ensure your base salaries and overall compensation packages are competitive.

How to approach the conversation

Asking for a pay rise is a potentially uncomfortable situation to be in for the employee – it’s probably taken some courage, so try to be completely honest and take their request seriously.

Keep in mind they are asking you this because they would like to stay with the company, so this is a good opportunity to work on your employee retention.

Sometimes, despite your best efforts, you have to turn down a request for a pay rise, for financial reasons, or to keep salaries and pay grades aligned across the organisation. To ensure the employee stays motivated and feels appreciated, put some time in your diary to meet with them, listen to their request with an open mind, and do your research before making a snap decision or answer.

Organise a follow up meeting to review their pay rise request and feed back the decision and reasoning to them. This is a great opportunity to talk to them about setting tangible goals that can be reviewed at a specific date in the future, but be careful not to over-promise here!

If you find yourself in a situation where an employee threatens to leave if you don’t pay them more, resist the urge to respond straight away and carefully think it over, considering their contribution to the company. Also, has their salary changed much over time? How does their salary compare to similar positions in the company, or similar positions available elsewhere?

If employees do want to leave because they’re being enticed by more money elsewhere, remember that the grass isn’t always greener. Everyone needs to consider the bigger picture – it’s not just about salary.

Remember it’s not just about salary

For much of the pandemic, many businesses were simply getting through to the end of the week, dealing with issues such as furlough and now don’t have the means to give out pay rises across-the-board. In this case you need to think about what will recruit, retain and engage staff instead of salary.

Company culture, a focus on wellbeing and opportunity for career progression all go towards retaining and engaging employees. You can read about this in detail in our blog here.

It’s also good to note that some employees may not be thinking about their ‘salary’ at all and want a one-off payment. Consider everyone on your team as an individual, some people may be struggling financially as a result of the rise in living costs, which is why they have come to you to ask for a pay rise.

Be kind and show compassion, especially when the answer is no. You do not want to appear dismissive or uncaring.

Look at your benefits package

A comprehensive benefits package is what many candidates are looking for when applying for work, and this may also help retain staff if you can’t offer them an increase on their salary.

If you have the capacity to allow people extra time off, extended holiday is a great way of rewarding employees. Working parents will appreciate flexible working benefits such as flexi hours, hybrid working or even a four-day work week.

Social events and team building days could make up another element of your benefits package, they not only help build relationships within your teams but also reduce stress levels and possibility of burnout.

Be open, honest and encourage feedback

As we’ve touched on above, we would always encourage you to be honest and transparent with your employees.

You want them to feel confident to have conversations with you or their line manager, on tricky subjects and if for instance they are struggling to make ends meet, this would be hard to do.

One idea is to ask your teams directly what they want, this could be through staff engagement surveys. These are a proven way to measure how your staff feel about working for your business, and to identify issues that need to be addressed, e.g. pay.

You can also ask managers to bring up the topic of pay in their 1:1s, just make sure they have the skills to have those conversations to begin with.

Preparation is key when it comes to handling salary requests. Set up a regular performance review and map out a plan with your employees how they can progress.

Managers should be assessing staff performance on an ongoing basis and there’s hardly anything as motivating as receiving a promotion or pay rise.

This being said, not everyone will feel confident or comfortable enough to ask you for a pay rise. Keep communication open and transparent and listen out for less direct requests too.

For support with recruitment, retention or developing an attractive pay and benefits package, please get in touch with our team at info@realityhr.co.uk.