By Phil Harwood

When an employee comes to you asking for (or demanding) a pay raise, it’s important to handle things appropriately. If you make the wrong moves at this critical time, you might end up in a place you wish you weren’t. However, if you make the right moves, you might end up in a better place than where you started.

I know this situation well and understand its delicate nature. In fact, I’ve sat on both sides of this table many times in my career. It’s a tricky situation and so my first word of wisdom is to never go it alone. Bring in at least one other person as an advisor to you. This may be a peer in your company, your business coach, or anyone whose opinion you respect. This is a field full of landmines and you want to be very careful about where you step. Get a partner. 

Begin by asking the “why” question and keep an open mind. There is a reason why people are asking for more money, and often it’s not about the money. Sometimes, there is more than one reason. Sometimes, it is just about the money. You have to get to the bottom of the situation and uncover all of the reasons. 

The tricky part here is that people won’t tell you the real reasons unless they really believe you will listen and care about what they’re saying. If you give any indication that you don’t have time for them, don’t have the patience, or don’t have the stomach to have a “real” conversation, they aren’t going to come clean. If this happens, the only conversation will be about money and you probably will end up losing the person EVEN IF their demands for more pay are met, because it wasn’t really about the money to begin with.

Start with the “why” question. Get the real reasons out on the table and work through them. You might still need to talk about money but that’s a secondary, less important part of the discussion. Money is important but only up to a point. Compensation needs to be fair and sufficient for the situation but once it has met those criteria, it becomes less important and other things take precedence. 

Before getting into the money conversation, ask yourself a few questions:

• Do you have in place a compensation matrix that shows where this person’s compensation lies on a spectrum from minimum to maximum for their position? If not, you’re in a bad position to start with because you don’t have a reference point to work from. 
• Was this compensation matrix updated in the last six months? If not, there’s a good chance it doesn’t reflect current value. It’s easy to get behind if you’re not paying attention. 
• Has this person been receiving regular, annual, cost-of-living increases? If not, they are slipping behind and they know it. 
• Has this person received merit increases for taking on more responsibilities or performing above expectations? If not, this is a key area to address and one that is commonly overlooked.
• What would be the impact of this person leaving your company? The more detrimental, the more urgent this situation is. 
• What would it cost you to replace this person, not just in terms of salary, but also in terms of onboarding and training a replacement? The more expense, the more urgent this situation is. 
• What has this person’s track record been and how deserving are they of this consideration? A pain-in-the-butt employee may not deserve much of an audience at all, but a high-performing one certainly does. 

My final word of wisdom is that you don’t need to make any rash decisions here. As long as the employee knows that you’re taking this seriously, take the time you need to make a good decision. However, don’t let this drag out for more than a week or two, and keep your employee updated on what’s happening. 

As you can see, there are several things to think about. That’s why it is so important to get a partner who will slow you down and help you analyze the situation. 

Good luck and let me know if I can be of any assistance. 

Now go forth.