Employee Raises.jpgby Rieva Lesonsky


It’s the phrase employers dread hearing from their employee: “Can we talk?”


Often what follows is a request for a raise. As small businesses continue to struggle with retaining employees—this will likely come up more often in 2020.


If talking about raises has always been uncomfortable for you, knowing the right way to handle the conversation can leave you and your employees feeling satisfied and optimistic about your future working relationship.


But first, just how important are raises to employees?


Mo’ Money


According to a survey from Kelton Global, commissioned by QuickBooks Payroll, while health insurance and paid time off matter to employees, salary is important to showing how much you value them.


Not surprisingly, the survey shows 44% of small business employees are not satisfied with their pay and 49% of those surveyed complain their salaries haven’t kept up with the cost of living. And if they haven’t gotten a raise in the past year, 54% are not satisfied with their individual salaries and their overall compensation packages. Which of course leads to unhappy employees who believe they could be earning more money elsewhere (69%). More troubling, only 55% say they’d actually ask for a pay raise, so the first you’d know about their unhappiness with their salary, is when they quit.


Low salaries and financial worries are the leading causes of workplace stress, according to Dr. Greg Willard, a Harvard University professor and executive at Cangrade, a job candidate screening company. Stressed employees are usually less productive.


If you have been giving annual raises, don’t stop now. When asked what would happen if they didn’t get a raise this year, respondents said: They would immediately start looking for a new job (37%); request a meeting with the boss (30%); or ask for a new benefit to compensate (21%).


Bottom line, salary is important, and the survey shows more workers are motivated by making more money (41%) than by getting benefits (31%).


How Much is Enough?


You should arm yourself with competitive salary information. For an overview of salaries by industry and location, check out the Salary Data & Career Research Center (United States) or at Salary.com. To know what wages your competitors pay (those businesses who want to “steal” your employees), check out job offers on Indeed and Glassdoor.


It’s not a must to match the highest salary out there. Hopefully, there are other factors about working for your company that are an incentive for your employee to stay such as company culture, small perks, room for advancement, etc. Even a small raise might make the difference between keeping and losing a valued employee.


An Indeed survey about how workers feel about their salaries revealed employees would like enough money to live comfortably. Only 18% said their lives are “comfortable” with their current salaries, the majority (61%) thought a boost of $6,000 would do the trick.


According to the Kelton Global study, of the respondents looking for a raise this year, 52% plan on asking for a 5% increase or less, 41% plan to ask for a 6% to 10% raise and 7% will ask for more than a 10% boost.


Having “The Talk”


It’s important to make the conversation as comfortable as possible. Don’t be defensive or standoffish as employees will feel your vibe and immediately believe you don’t feel they’re worthy of the conversation, let alone the raise.


Assume your employee has a number in mind and will likely come to the meeting with knowledge of competing salaries and an expectation. Be prepared to talk about other non-direct compensation perks.


If the salary increase is tied to a performance review, underperforming employees will be disappointed, so you need to offer examples of where performance lacked and future expectations. Conversely, if the raise is substantial, the performance discussion should focus on the positive aspects of the employee’s performance.


Employees rarely think their raises are high enough. If business is tight, don’t alarm your employees, so they panic and immediately start looking for a new job. Be honest, saying, “business is tight right now, but in a few months we can consider another increase.”  Don’t say this if there’s no intention of following through.


No matter how hard the conversation may be for you as the boss, your employees trust you to respect and validate their value.



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