5 Steps to Effectively Handle a Request for a Raise as a Manager

How to Handle a Request for a Raise
Talking about money can be really uncomfortable.  During our new manager training sessions, new supervisors tell us that one of the most challenging situations managers face is how to handle a request for a raise from one of their direct reports.

As a first time leader, it is easy to feel unprepared and to be unsure about the best way to respond. But make no mistake, how you handle a request for a raise from a member of your team matters.

Why Your Response Matters
Regardless of how you frame a conversation about a pay increase, there is a lot of potential for miscues.

If poorly managed, an employee request for a raise can undermine your credibility and seriously disengage your people.  If, however, you respond in a fair, consistent, transparent, timely, understanding, and supportive way, you can strengthen your relationship with your employee – regardless of whether you grant or deny the request for an increase in pay.

The Right Way to Handle a Request for a Raise
Here are some tips on how to respond in an appropriate and empathetic way.  Your job as manager – when all is said and done – is to successfully lead your team.  Will the raise bring you closer to those goals or put team goals and team cohesion in jeopardy?

1. Buy Some Time
   First, do not feel compelled to respond immediately – either positively or negatively. To get it right you need to take the time required to understand the possibilities and identify the individual, team, and corporate implications of the request. This starts with understanding your company’s compensation philosophy and budget for salary, bonuses, market competitiveness, pay equity compliance, annual merit increases and other incentives.

   Do not make any promises until you clearly understand the parameters you must work within and the implications of granting or denying a pay raise.  For example, you may have more flexibility in other areas like professional development, paid time off, conferences, transportation costs, or other perks.

2. Listen and Ask Questions
   When an employee feels courageous enough to request a raise, listen carefully so that they feel appreciated, heard, and understood. Your objective is to pinpoint the root cause behind why they’re asking for a raise such as feeling undervalued, overworked, underrecognized, or just plain underpaid.  After actively listening and not getting defensive, let them know that you’d be happy to do some research and set up a time to continue the conversation.
3. Do Your Homework
   Is the request warranted? Check out what others are earning on the team and in the industry for the same job.  Be able to clearly articulate how your organization looks at past performance, potential, compensation, salary budgets, the value and nature of their job responsibilities, and any relevant skills, education, or certifications.

   Learn what is possible and then be ready to advocate for them if the employee is key to the team’s success.

4. Consider the Employee’s Contribution
   How important is the employee as a member of the team in the achievement of current and future team goals? How critical is their contribution and what has been their performance over time?  Would a bonus for a special project satisfy or does this employee need an ongoing tangible vote of confidence and encouragement?
5. Deliver the News Compassionately and Objectively
   After you’ve analyzed all the appropriate factors, it will be time to share your conclusions with your employee. This should be done in person so you can discuss the rationale behind the decision.If the news is good, describe the process and who was consulted.  The employee should understand that they earned the raise because of the value they bring, not simply because they were brave enough to ask.

   If the news is bad, also describe the process and be clear about why the request was not granted.  It might help, too, to explain how they might increase their value and then work together on a plan to be able to earn a raise in the future.

The Bottom Line
The way you respond to a request for more money is critical to maintaining the good will of your employees.  Be sure you show that the request was taken seriously even if the news you need to deliver is disappointing.   Transparency and compassion are important. You want your team to feel valued for their contributions.

You will know you are headed in the right direction when your employees:

• Believe that you value them as your most important resource
• Know they will be recognized if they contribute to the organization’s success
• Feel they are paid fairly considering the value they bring

To learn more about how to better communicate with your employees as a manager, download 7 Tips on How Managers Can Increase Employee Engagement through Communication