How to communicate a pay raise with your employee
When it is time to communicate an increase in salary to your employee or team, consider the following to help ensure clarity and alignment.
Have a one-on-one meeting about a pay increase
Generally, discussions about pay increases should be done in person and privately. Salary can be viewed as a personal topic for many employees. Schedule your meeting during business hours to help ensure professionalism and privacy. Conversations that take place in a casual setting or outside of working hours may not be formally acknowledged by the employee.
Provide positive feedback
If you are giving an employee a pay raise, consider letting them know why they are receiving it to help encourage future expectations and positive feedback. Recognising individual contributions can significantly enhance employee engagement and motivation, and reinforce the value of their hard work.
Highlight any specific contributions your employee made to the company that contributed to the increase in salary. Thank the employee for their contributions to the company to encourage them to continue doing a great job.
Follow up with written confirmation
Providing a clear reference point in written documentation may also help employees understand the reasons for their pay raise. For example, when communicating a salary adjustment in writing, you may want to say that the increase reflects the employee’s individual contributions to a recent project, which directly supported your company’s goals and improved company performance.
Outlining your reference point may also set future expectations for the employee, so they understand what is required for them to receive another raise. For example, if you award a pay raise to account for cost-of-living, your employee may expect them periodically. If you are rewarding exceptional work ethic or performance, it sets an expectation for similar performance to achieve another raise in the future.
Consider including the date the raise begins. If the date is in the past, and you will provide back pay, include this information in the communication. If the date is in the future, such as the next pay period or first day of the new fiscal year, it helps the employee understand when they will receive this new amount.
Include dollar amounts and percentages
While you may be awarding a percentage-based increase, such as 2%, communicate the corresponding value to your employee in dollars by presenting their new annual salary figure or new hourly rate. Also, a 2% increase may be a substantial amount of money in context, but that number alone can sound small to an employee, especially at first.
Communicate your decision to payroll personnel
The payroll team also needs to be advised that an employee has received a pay raise so that it can be paid from the start date as well as noted on the employee’s payslip.
Why give pay raises?
While it may seem that giving a raise in pay will cost your business, regular pay raises show your employees that you recognise their contributions to your company. Pay raises are also an opportunity to have positive discussions with your employees about your organisation and their role.
If your employee regularly puts in overtime, takes on extra duties or goes above and beyond to complete projects by deadline, you may wish to reward this effort with a pay raise. Other financial rewards include bonuses, profit-sharing and share options.
You may also wish to consider what competitor companies are paying employees in similar roles or jobs to ensure you are providing fair pay. Many different salary benchmark reports are available that may be tailored to your industry.
If workers are facing financial stress at home, such as increasing bills or relationship changes, they may look elsewhere for a higher salary. Remember that a raise can be a good retention tool, and employee turnover may cost your company more than the raise. External factors, such as economic conditions, the company’s financial position and recruitment costs may also influence your ability to raise salaries.
When is the best time to give a raise?
Every company may take a different approach when it comes to scheduling salary increases. Sometimes pay increases are written into an employee’s offer letter or contract, such as an annual raise on the same date. For example, 1 July, the start of a new financial year, may be a typical time to apply a raise.
Other increases written into an employee’s contract may be performance-related. For example, this may be when a pre-determined number of products are sold or overall revenue in the department or company increases by a pre-determined amount. This clause may also cover a rise given when the employee takes on additional responsibilities and duties beyond their core role.
Employees who demonstrate strong leadership among their peers or have regular contact with valuable clients may also receive a raise when key milestones are met. For example, when a valued client celebrates a 10-year association with your company, you may decide to award a raise to the employee who primarily liaises with them. This helps recognise their ability to sustain a positive relationship with the client.
Other companies discuss and issue pay raises during employee reviews and evaluations. Salary reviews and performance reviews, including annual reviews, are key opportunities to assess an employee’s performance and employee’s contributions.
By following these steps to communicate a pay raise, you can increase the chance that the message is clearly understood. Be prepared with facts to support your reasons, in case a pay raise is not positively received. It may take practise, but communicating pay raises is a common task for any leader or employer.
