Is your “compensation conversation” script feeling a bit rusty? Jane tackles the tough questions on how to respond when an employee asks for a raise, balancing the need for market research with the realities of company budget constraints.
A READER WRITES:
Dear Jane,
One of my strongest developers just approached me asking for a significant salary increase. They mentioned they’ve seen higher figures for their role online. I want to keep them, but I’m worried about my company budget and how this fits into our next scheduled performance review. How do I handle this without demotivating them?
Nervous in Nashville
How to navigate a salary increase request from an employee
JANE’S RESPONSE:
Nashville, take a deep breath. This is actually a sign of a healthy relationship your employee feels comfortable enough to advocate for themselves. However, “winging it” is not an option here. You need a strategy that balances employee retention with fiscal responsibility.
Step 1: Consult the Data
Before you say “yes” or “no,” you need to conduct some market research. Don’t just take their word for it. Look at industry benchmarks for their specific role and experience level. If your market research confirms they are underpaid, you have a much stronger case to take to HR. Remember, high-quality market research protects you from making emotional decisions that could skew your department’s pay equity.
Step 2: Check the Treasury
Next, look at the company budget. Even if an employee is a rockstar, you can’t manifest money out of thin air. If the company budget is tight, you might need to look at non-monetary perks or a phased salary increase over twelve months. Being transparent about the company budget (without being “the bad guy”) helps manage expectations.
Step 3: Align with Performance
While the request might come mid-year, you should always tie a salary increase back to tangible results. Usually, this happens during a formal performance review, but if they ve taken on extra responsibilities, you might move that timeline up. Use their last performance review as a baseline to see if their output truly justifies the jump. If a performance review isn’t due for months, consider doing a “mini-review” now to document their recent wins.
Step 4: Focus on Retention
At the end of the day, employee retention is usually cheaper than hiring someone new. Replacing a specialist can cost up to twice their annual salary. If you prioritize employee retention, you’ll realize that meeting a reasonable request is an investment, not just a cost. However, employee retention isn’t just about the paycheck it’s about the culture, too.
Jane’s Cheat Sheet: What to Say During Salary Increase Request
If you need time: “I value your contribution. Let me conduct some market research to see how your role aligns with current industry standards.”
If the budget is tight: “The company budget is currently locked until Q3, but I want to discuss a path to this figure during your next performance review.”
If they’ve earned it: “Based on your stellar output, I’ve secured a salary increase to ensure our employee retention remains a top priority.”
Don’t fear the “money talk.” When you approach these requests with a mix of market research, a clear eye on the company budget, and a focus on employee retention, you turn a stressful moment into a coaching opportunity. Whether it happens during a performance review or a casual 1:1, being prepared is your best asset.
Are you facing a tricky workplace dilemma? Write to Jane Harper with your questions on workplace conflict, policy issues or people management problems. Your situation could be featured (anonymously) in a future column.
Don’t let the changing world of work derail your hiring instincts. Send in your HR queries with the subject line ‘Ask JANE HARPER’ at info@thehrdigest.com.
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