How to Communicate a Pay Raise

When your company grows, your employees grow with it. An essential component to retaining and growing your talent base is increasing salaries for your employees. As a manager, chances are that you have not been formally trained in how to communicate a pay rise to members of your staff. Knowing how to discuss increases to a salary shows your ability to be a strong leader who considers the needs of the staff. In turn, this increases the trust that your employees have in you, as it shows that you value their time, expertise and are able to make difficult decisions that concern them. However, discussing salaries with another person can be a sensitive topic that needs to be handled delicately. Here are some tips and guidelines to use when communicating a pay raise.


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Why give pay raises?

On paper, giving a raise in 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 employee’s contributions to it. Some employees may express their frustration with feeling underpaid or not having their time valued properly. Communicating a pay increase opens up an opportunity to discuss with your employees the reasons or equations used to calculate the amounts in their salary. These reasons might include:


    • What 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


While many employees may demonstrate loyalty to their company and their co-workers, they may find themselves considering how their salary impacts their life outside of the office. Stressors from home and family life, increasing bills or changes in their personal life may have employees looking elsewhere for an increased salary. Having regular discussions about your employee’s salary and anticipated raises allows your company to remain competitive and retain the best talent.


When is it 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. Other companies discuss and issue pay raises 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


    • Who work to increase the overall revenue of your department or company


    • Are taking on added responsibilities


  • Who demonstrate strong leadership amongst their peers


How to communicate a pay raise with your employee?

When it is time to communicate an increase in salary to your employee or team, there are several key factors to bear in mind. Whilst it can be exciting to deliver good news to an employee, a miscommunication can result in conflicts or legal liabilities. Generally, discussions about 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 salary increase:

    • Always give context to the pay increase. Whether you are issuing a raise to be consistent with the cost of living increases in your area or if you are rewarding exceptional work ethic or performances, always make sure that you let your employee know why they are receiving a raise.


    • Highlight any specific contributions your employee made to the company that contributed to the increase in salary.


    • Always discuss the raise amount in dollars instead of percentages. Saying it is a “2%” increase always sounds less significant than the corresponding amount in dollars. Tell the employee the new annual or hourly pound amount they will be receiving.


    • If an employee is only receiving a cost-of-living increase, frame it as a merit-based pay raise. Doing so is likely to increase employee confidence and morale.


    • Avoid giving any reason as to why the salary 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 raise is communicated, follow up with your Human Resource department to confirm that the pay raise has been applied.


Who should communicate the raise?

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 to the manager who oversees their department. In some cases, it might be necessary to have a human resources representative on hand to answer any questions concerning withholdings or payment logistics.


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