How to manage an employee’s salary increase request?

In any organization, employees may request a salary increase for a variety of reasons, such as recognition of their performance, the need to adjust their salary to the market, or for personal reasons. Handling these requests effectively is crucial to maintaining team morale, retaining talent and ensuring fairness within the company. Here is a structured approach to handling a salary increase request in a fair and professional manner.

1. Listen carefully to the request and respond respectfully.

The first thing to keep in mind is that any request for a salary increase must be listened to carefully and treated with the utmost respect.

Most people must work up the courage to ask for the raise, even if they feel it is something they have earned (otherwise, they would not be asking for it). Allow them to make their case and then ask questions in a positive, non-aggressive manner to further their rationale.

Arrange a private meeting where the employee can express his or her motives without interruption. It is important to show empathy and understanding, as this helps to establish open and honest communication. Ask for the specific reasons behind the request and take detailed notes.

2. Reviews employee skills and performance

Carefully consider the individual’s contributions to the company in a performance review. Allow them to inform you about specific initiatives or tasks of which you may not be fully aware. What it seeks is for everyone to win, not to impose an obstacle. What is the true value of this employee? How great would the loss be if they decided to leave?

Before making a decision, it is critical to review the employee’s performance history. Evaluate his or her accomplishments, contributions and any feedback received from peers and supervisors. Consider aspects such as: Has he or she met or exceeded established objectives, does he or she consistently deliver high quality results, has he or she developed new skills or taken on additional responsibilities, does he or she contribute positively to the work environment, does he or she contribute positively to the work environment, does he or she contribute positively to the work environment, and does he or she contribute positively to the work environment.

If denying a pay increase is performance-related, it is vital to let the employee know where he or she needs to improve and what you will do to help, so that he or she is likely to get a positive response the next time he or she asks. At the same time, find something they have done that you can praise.

3. Analyze internal and external equity, make sure it is fair.

It is important to consider internal and external equity when evaluating the request for an increase. Compare the salaries received by the individual’s peers and what is common in the industry. Is the employee in the same salary range as others with similar seniority, experience and skills? Consider how long they have worked for the company.

Compares the employee’s salary with that of colleagues in similar positions within the organization. Ensure that any salary adjustments do not create unfair disparities that could affect team morale.

Researches market salary trends for similar positions in the industry. Use compensation studies and benchmarking data to ensure that your company’s salaries are competitive.

4. Review the company’s budget and policies

Before committing to a salary increase, review the company’s available budget and compensation policies. Ensure that any adjustments are sustainable and in line with the organization’s financial guidelines. If budget is limited, consider other ways to recognize employee performance, such as one-time bonuses, additional benefits or professional development opportunities.

If the company or department budget does not support a salary increase for an individual employee (which may also require salary increases for others), clearly and honestly explain why.

And if it’s not just about the money, what do they really want? While everyone wants to be paid what they think they are worth, people are equally concerned about the value of the company, its work culture and lifestyle incentives.

In Oracle’s AI@Work global study of 14,639 workers, nearly nine in 10 respondents said the meaning of success was most aligned with achieving work-life balance, having good mental health and having flexibility at work. Twenty-nine percent said that having a meaningful job was more important than a steady paycheck.

Therefore, consider offering benefits in addition to a raise, such as working from home, the flexibility of hybrid work between home and office, and providing child care.

5. Make an informed decision

Once all the information has been gathered, it is time to make an informed decision. Consult with other members of the leadership team if necessary and consider all variables before communicating your decision. Remember that transparency and fairness are fundamental in this process.

6. Communicate the decision

Regardless of the decision, it is essential to communicate it clearly and respectfully:

People who are a proven part of the team whose skills are known and recognized deserve a salary increase. If the budget allows, strive to reward them, as it is much less expensive to retain a good employee than to hire and train someone new. Consider offering special bonuses or mid-year salary adjustments instead of a standard annual review.

If the raise is approved, express your appreciation for the employee’s work and explain the factors that led to the decision. Provides details on the new salary and when it will take effect. Reaffirm your confidence in his abilities and your expectation that he will continue to contribute positively.

If the increase is refused, explain the reasons behind the decision in an honest and constructive manner. Provides specific feedback on areas for improvement and discusses possible ways to achieve an increase in the future. Consider alternatives for recognizing their performance.

9. Technology as an ally

A comprehensive HR solution offers a range of functionality designed specifically to address these types of challenges. Provides access to accurate and up-to-date data on employee performance, salary history and comparisons with the labor market. This allows managers to make informed decisions based on solid data, objectively assessing individual performance and their contribution to the organization’s success. In addition, it facilitates performance management by enabling continuous monitoring of objectives and providing tools to offer constructive feedback to employees. Career planning is also enhanced, as the platform helps design customized career plans and offers development opportunities that align with individual goals and company needs. It also promotes transparency and communication by providing a clear channel for communicating compensation policies and criteria for salary increases, as well as facilitating open dialogue between managers and employees.

An HR Solution not only simplifies the process of managing incremental requests, but also improves fairness, efficiency and satisfaction in the workplace by providing a comprehensive talent management solution.

Ricardo García Lema

Ingeniero principal de soluciones HCM en Oracle Cloud HCM