Why give pay rises?
On paper, increasing pay can seem like a costly activity that may cut into your overhead. However, giving regular pay rises to your employees is an opportunity to have positive discussions about your company and the employees’ contributions to it.
Some employees may express their frustration with feeling underpaid or not having their time valued properly. Communicating a wage increase opens up an opportunity to discuss with your employees the reasons or equations used to calculate the amounts in their pay packet. These reasons might include:
- How much competitor companies are paying employees in similar roles
- The size or value of their client book
- The number of reported hours they are working on a weekly or monthly basis
Although many employees may demonstrate loyalty to their company and colleagues, they may find themselves considering how their wage affects their life outside the office. Stressors from home and family life, increasing bills or changes in their personal life may have employees looking elsewhere for an increased wage. Having regular discussions about your employees’ wages and anticipated rises allows your company to remain competitive and retain the best talent.
When is it time to give a pay rise?
Every company may take a different approach when it comes to scheduling wage increases. Sometimes, pay increases are written into an employee’s offer letter or contract. Other companies discuss and issue pay rises during employee reviews and evaluations.
It is also worth considering individual pay adjustments with employees whose performances are consistent with the growth of a company. Examples of this can include employees who:
- Have regular contact with valuable clients
- Work to increase the overall revenue of your department or company
- Are taking on added responsibilities
- Demonstrate strong leadership amongst their peers
How to communicate a pay rises with your employee
When it comes to the time to communicate an increase in pay to your employee or team, there are several key factors to bear in mind. Although it can be exciting to deliver good news to an employee, a miscommunication can result in conflicts or legal liabilities.
Generally, discussions over pay increases should be done in person and privately. In some cases, it may be helpful to have a representative from human resources or accounting present to answer any questions.
Consider these best practices when it is time to communicate the pay packet increase:
- Always give context to the pay bump. Whether you are issuing a rise to be consistent with the cost of living increases in your area or whether you are rewarding exceptional work ethics or performances, always make sure that you let your employee know why they are receiving a pay rises.
- Highlight any specific contributions your employee made to the company that contributed to the increase in pay.
- Always state the pay rise as a currency amount instead of a percentage. Saying that it is a 2% increase always sounds less significant than the corresponding currency amount. Tell the employee the new annual or hourly amount they will be receiving.
- If an employee is only receiving a cost-of-living increase, frame it as a merit-based pay rise. Doing so will typically increase employee confidence and morale.
- Avoid giving any reason as to why the pay packet increase isn’t higher, unless the employee mentions their dissatisfaction.
- Always thank the employee for their contributions to the company to encourage them to continue doing a great job.
- After the increase is communicated, follow up with your human resources department to confirm that the pay rise has been applied.
Who should communicate the pay rise?
The communication of the pay increase can depend on your company’s existing payroll protocol. This may be left to the employee’s direct report or the manager who oversees their department. In some cases, it might be necessary to have a human resources representative available to answer any questions concerning withholdings or payment logistics.
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