It’s the workplace HR issue that can make or break your staff retention rates, but does anyone really know the best way to handle staff pay?
The legal position is that there is no legal right to a pay rise unless you stipulate it in the contract.
Common business practice is to carry out a yearly review of employee performance and contracts alongside an assessment of the business to see what you can afford, conduct a 1-1 meeting with them and during this assessment, decide whether they have earned a pay rise.
For some, an annual pay rise for all employees is standard practice but can vary in size depending on performance of both the employee and the business.
These kinds of decisions should be based on:
- Employee performance: have they consistently hit target, are they a benefit to the business
- Behaviour: do they get to work on time, do they get along with the team, have they been easy to manage
- Workload: does their current salary match their current workload, has this increased over the year, are they often staying late or taking work home
- Commitment: sometimes someone who has stuck with the company and been loyal for years just deserves a sign of appreciation
Rewarding your employees with a pay rise will improve productivity, retention rates and their mental well-being as there will be less financial stress outside of work and they will be reassured that their hard work isn’t going unnoticed.
What Should You Do If an Employee Asks for a Pay Rise?
If you opt not to include any mention of pay increase in your employee handbooks, or just to not bring the topic up at all, then it’s likely that you will be asked about it by an employee at some point or another.
If an employee approaches you and asks for a pay rise, then the best course of action is to consider the following before making a decision:
- Can the business afford it?
- How long has the employee been at the company, and have they proven their worth in this time by hitting targets or achieving objectives?
- How long has it been since their last pay rise?
- Has their workload increased recently?
- How important are they to your business, and can you risk losing them?
Once all of this has been considered, and you have discussed the issue with the relevant people i.e. a finance team, you should call the employee into a meeting during which you can address the topic of pay.
Give them the opportunity to present their case as to why they believe they deserve a pay rise and, if you cannot argue against it and your earlier consideration deemed it reasonable, then the next step is to decide how much of a pay increase they will receive and when it will come into force.
It may already be included in your employee handbooks if there is a standard pay rise percentage across the business i.e. an annual 5% increase on current salary, or it may just be based on what you feel that they have earned.
It’s best to put forward your offer in the meeting and give them a chance to consider it and get back to you which may lead to negotiations, or a simple acceptance.
If you refuse a pay rise request then you must prepare for the fact that you may end up losing your employee or that you may see a decline in their productivity and performance – this is something to consider when coming to your decision.
However, you can encourage your employee by providing them with constructive feedback on how they can improve their work in order to potentially get a pay rise in the future.
However you choose to handle employee pay, you should always aim to keep it confidential and handle it fairly and with careful consideration.
If you require some assistance with your staff salary issues, then feel free to call us on 0845 2626 260 as we have a professional HR department that can offer advice and support whenever you need it.