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One of your finance team wants more money. Whether or not you hold the purse strings for your team or organisation, this is a tough situation for managers. If not handled correctly, it is still one that can be problematic, with the worst-case scenario being the beginning of the end of a great employment relationship. How should you respond?

To help you, Halliday Marx have put together a useful overview for responding appropriately when an employee asks about pay rates and salary negotiation.

Initial responses are important

Always treat the request as a serious conversation. Schedule a convenient time for both parties to sit down and discuss the matter. It is important that you don’t provide an immediate response or indicate the likely outcome.

During the meeting itself, remain calm and make sure you allow the employee time to express why they believe they have a strong case for a pay rise. Try if you can, to keep the discussion as factual as possible. This will limit any possible angry, defensive or emotional reactions.

Employees request pay rises for many different reasons. Perhaps the employee feels their salary is below the industry average. Or perhaps their responsibilities have increased. Maybe the company is performing well financially and the loyal employee thinks it is time they caught up on their perceived poor increases from previous salary surveys or reviews.

In this situation, your first reaction, regardless of whether you think the employee deserves the raise, should be curiosity. Ask them to tell you more, this indicates that you are not dismissing the request.

At the end of your meeting advise the employee on the process you will follow to consider their pay rise, agree when you will next meet to discuss any decisions or progress and thank them for bringing it to your attention.

Making a decision

So how do you evaluate an employee’s pay rise request? A good start is to look at the individual’s performance in comparison to the rest of the team to ascertain if they deserve a pay rise. Have they met their objectives? Have they added value to the team and the business? Do they live up to the company values? Ask for help if you need it, consult with human resources or other peers in the organisation that have the expertise and experience to assist in this area.

At Halliday Marx, our consultants always have an up-to-date, holistic view of salary rates within the London accounting market. We can help you benchmark the role using external data across similar industries, along with other contributing factors such as, company size and location that may impact salary.

If the company is financially unable to offer the employee an increase but you believe they still deserve a pay rise, then perhaps there are other options you could consider? Perhaps non-monetary incentives such as extra training, holidays or flexible hours would work in place of a salary negotiation.

The final piece of the puzzle is to fully understand the implications should you have to replace the employee if you can’t give them what they want.  If you think you have no room for a pay rise because of budget constraints, consider the cost of your time, possible cost of recruitment and the possibility you may need to pay more to a new employee. Suddenly, as long as the individual is worthy, a small pay rise might be the best approach.

Communicating your decision

When it’s time to talk, be methodical. Explain your process, detail your research, and outline your discussions with HR and Senior Management.

If you’re delivering bad news to a salary increase request, we recommend providing feedback promptly and succinctly in a private environment to ensure your employee understands the reasons behind your decision. Always be positive, the conversation must be delivered in a manner that won’t discourage them from initiating a similar pay rise discussion in the future. You don’t want to lose their trust.

John Marx, Director, Halliday Marx, suggests asking if employees have any questions before rushing them out of the room. “People will understandably feel disappointed, so make sure you allow them enough time to digest the news”.

It is important to be honest, but if there is a genuine ‘not right now’ clause, this is also an acceptable response. Perhaps map out a way to move forward, discussing what they need to do to get to that next stage in their professional development and be financially rewarded for it.

Alternatively, should the response to their request be positive, make your reasoning obvious and also explain that this is a unique case and not the norm. If you don’t make this clear, you can run the risk of other employees who don’t necessarily deserve a pay rise also seeking pay review meetings. Also, be aware of financially dissatisfied employees who may not be brave enough to speak up.

In summary

The right response to a pay rise request will depend on a number of factors such as, business performance and budget, job description, and of course the employee in question. Providing you’ve been thorough in your review process and clearly presented the reasons around the decision, then most employees respect you for tackling the issue with empathy and professionalism.

If you’re in need of advice regarding market rate information for London’s Financial talent, call us on 020 7096 8200, or write to us at [email protected]

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