Responding to employee requests for pay rises - and finding room in the budget

February 28th, 2017


As a business leader, one of your top priorities is to find talented people and nurture them so they can be successful members of your staff. Once you've identified your best and brightest, the goal is to give them more support and push them to fully maximise their potential.

How will you respond when an employee comes along asking for a substantial pay rise?

There's just one little complication - once your top employees realise how valuable they are, they're likely to use that information as leverage. If they're truly "rock stars" of the office, they'll want to be paid like it. So how will you respond when an employee comes along asking for a substantial pay rise?

Handling a request like this can be tricky - you want to give your best employees more money to keep them happy and engaged, but you also have to reconcile this with the need for stability in the company's budget long-term. The objective is to find a happy medium between these two competing goals.

Handling an employee's pay rise request

If an employee is achieving at a high level and adding significantly to the cash flow your company brings in, there's a good chance that the individual is justified in asking for a pay rise. Still, though, it's difficult to handle such requests if you're not prepared for them.

According to research from Robert Half, it's important to take these requests seriously. Saying no, or simply giving a curt answer such as "We'll think about it," is likely to alienate the employee and lower their levels of engagement and productivity. Therefore, it's best to seriously contemplate raising the worker's pay and letting them know you take their value to the company seriously.

Review the employee's past performance. How much have they done to boost the capabilities of the business? Can you put a dollar figure on the value they've brought to the table? If so, you may want to consider giving the employee a fair share of that money.

Justifying wage increases in the budget

Deciding, in a vacuum, whether an employee is worthy of a pay rise is the relatively easy part. What's much harder is determining how exactly you'll find the working capital to pay for such a change. After all, you have only a finite amount of money in the budget, and it's all probably spoken for already.

How can you increase wages but keep your budget manageable?
How can you increase wages but keep your budget manageable?

To this end, Compensation Today recommends putting together a cash flow forecast that projects the financial impact of either giving the employee more money or not. If you do grant the person's request, how much will you gain from their increased engagement and improved work? If you don't, how much will you lose conversely? Do the potential rewards outweigh the risks?

Once you've been around the block and handled a few of these pay increase requests, you can start tracking your results historically and measuring whether they've been successful or not. Having knowledge of your prior track record can help you improve decision-making in the future.

Finding the cash to adjust your staffing plans

In an ideal world, you'd be able to give your employees pay rises all the time. After all, you want them all to feel valued and truly engaged. Unfortunately, the world isn't always ideal, and you don't always have all the cash on hand to achieve all the staffing goals that you'd like.

This is difficult, but the good news is that invoice finance can help you deal with such dilemmas. If you want to give an employee more money but can't find the cash to pay for it, you can reach out for a bit of temporary help with cash flow to get you through a tough spot. Then, you can pass that money along to your employees who deserve it most.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].