Salary Negotiation Tips for Employers

How to Respond to a Request for a Raise

It’s that time of year again: the annual salary budget has been set, performance evaluations are done, and suddenly managers are hiding behind closed doors, anxiously dreading “the talk.” The annual compensation conversation doesn’t need to be a daunting, mysterious process, either for managers or the staff they supervise.

Employees will ask for a raise. They will. In fact, it’s their job to ask for a raise. It’s also their responsibility to come to the conversation prepared with a clear and well-thought-out rationale for why they believe they deserve one. With a little preparation, managers can head into the annual compensation meeting feeling competent, knowledgeable, and unafraid of the inevitable ask.

Three Steps to a Smooth Compensation Conversation

1. Prepare, Prepare, Prepare

Once managers accept that the employee will ask for a raise, it’s easier to prepare for the conversation.

Know the market: What’s going on in your market in general? Examine companies with a similar industry, size, and location. Are companies giving 3 percent raises? Or, are they still in the hazy minimal raise days? Have reliable market data for each position on your team. Your HR or compensation professionals should be able to provide you with this information.

Know the organization: How is your organization performing as a whole? What has your organization decided around raises this year? Has the budget been determined? What are the business priorities for your organization and what are you trying to reward? Performance? Tenure? Certain roles or hot jobs?

Know the team: Money is a finite resource. If your raise budget is 3 percent and you decide to give one employee 5 percent, someone else is getting 1 percent. Knowing the ins and outs of your team will help you determine who should be getting above average raises and who should be getting below. Be able to articulate, at least for yourself, why each person is getting above or below and make sure you have a concrete rationale.

Know the employee: How long has the employee been with the company? Does their performance meet or exceed expectations? Do they perform a job that has high intrinsic value to the company?

2. Listen Actively, Communicate Assertively, and Own Your Decisions

When you sit down for the meeting, try to pick a time and place that minimizes distractions and interruptions. Make sure that the employee feels like you have heard them, and, of equal importance, you will want the employee to hear you.

Listen Actively: Most employees who deserve a raise have put time and effort into preparing their rationale for why they believe they do. Hear them out. They may be asking for the moon, but if they can clearly and concisely show you their contributions and accomplishments, listen. You may find out more about them in this section than you did during the performance evaluation meeting! Many times, in their anxiety to get through the salary negotiations, managers forget the simple step of listening to their employees, and you can’t expect them to listen to you if you don’t model that behavior first.

Communicate Assertively: When it’s your turn to talk, be clear about what you can and can’t do. Don’t promise them the full enchilada if what you can give them is a piece of cheese. These days, many managers are people-pleasers, eager to get their employees what they want. Yet, it’s important to be firm, direct, and honest about what’s possible. If it is within your organizational culture, share the market data both overall and for the position. Consider sharing the organization’s budget for overall increases. If appropriate, explain the process for determining salary adjustments to them.

Own Your Decisions: As a manager, you are often one of the largest influencers of an employee’s pay, whether you’re making the decision yourself or passing along information about performance or skill-level to others. Even if you’d like to do more or less for a staff member, but the powers that be feel otherwise, you help determine the salary for your employees. However the exact salary adjustment amount is determined, back it up and communicate it to the employee as though it were your own. It will help the employee accept the decision, and may gain you management points with the higher-ups.

3. Follow Up

Whatever you talk about in your compensation conversation, be sure to follow up. If questions were raised, get the answers. If concerns about the process were communicated, pass those along to HR or your compensation folks. And perhaps, most importantly, whatever you agree to pay the employee, make sure it shows up on their pay check.

Whether you’re a manager who has a lot of flexibility or one who is given salary increase amounts for each employee, you can expect that your employees will be looking to you for answers. Won’t it feel better when you have them?