What should I do when an employee asks for a pay rise?

Employees have an instinctive feel for when a company is doing well, and possess firsthand knowledge of how busy your company is, even if they do not know the financial details.

It's only natural that where pay structure is not strategically laid out between management and unions, an employee is going to ask for a pay increase.

This isn't necessarily a bad thing. If the employee in question is valued, you'd have a chance to work out a fair increase rather than have them leave on the basis of a late offer.

Responding to the request
In large organisations, pay scales and bonuses, if applicable are set out within bands. Effectively there is only so much room to manoeuvre when an employee asks for a pay increase. Moreover, in this case, it's likely that no request will be forthcoming as the employee will be only too aware of pay policy.

Where the pay strategy is less rigid it is more than likely that an employee will seek a pay rise. The response should be to try and formalise the request and make sure that the asked-for increase becomes a subject for their performance or pay review.

Managing expectations
Pay reviews are an important process and often require care and preparation in order to meet your employees' expectations and ensure that the review is a valuable process.

It is imperative that explanations are offered as to the reasons behind why salaries are reviewed. Not everyone may receive a pay increase or at least an increase at the level they were expecting, so it is important that their expectations are managed by fully justifying your decision.

Likewise, you may be in a position to offer someone a pay increase at a higher level than they were expecting. Here, it is important that you fully utilise this situation by praising and congratulating on excellent performance or contribution.

Stopping a flood of requests for pay-increases
A good first step in undertaking robust salary reviews is to ask employees fill out a self-evaluation form prior to the actual review.

This can often assist in taking the unpleasant surprises out of the review process and helps the employee focus on what has happened during the past year and what she or he hopes to accomplish in the coming year. It also prevents one request from turning into a flood.

Reasons to decline a salary increase request
As a manager, you will need to handle salary negotiation positively. If you encourage people to adopt a constructive approach to salary negotiation, you will help to minimise upset even if you are not in a position to affect a pay increase.

In all cases, you need to examine with the employee why they think the request is justified? If so, put measures in place to ensure they receive an increase at their next review.

There may be almost unlimited reasons why you deny a pay increase request. An employee may already be paid in relation to the current market worth of their role. How much extra responsibility would the employee be prepared to take on to justify the increase?

Final thoughts
In all negotiations with employees, it goes without saying that fairness is the key and giving your employee a chance to discuss their request is part of the way forward.

Whilst you are discussing pay, it is important always to recognise the difference between the value of the role your employees perform and their value as a person to your company.

If you are not able to facilitate a pay rise at the time, then the most positive way to approach this is to re-evaluate an employee's contribution and responsibility and link this to a pay rise – if not immediately, then in the future. This is an approach that employees often respond to better than simply telling them that they are not entitled to a pay increase either now or in the future.