Compensation Conversations

Given the recent record economic performance, it shouldn’t come as a shock to managers and business leaders that a salary increase is at the top of many employees’ minds. Plus, low unemployment—3.8 percent in May as reported by the U.S. Bureau of Labor Statistics—means your employees have choices about where they want to work, so compensation questions could come up more often.

For a manager, salary negotiations can sometimes be a tough balancing act, particularly when they involve top performers the organization doesn’t want to risk losing. So what can employers do to better manage requests for raises?

1 Set Expectations From the Beginning

From the very beginning of an employee’s tenure with the credit union, managers should make it a point to communicate clearly about salary expectations, including how and when raises and/or promotions are handled across the organization.

For instance, many employers choose to tie salary thresholds to the licenses or certifications the employee holds. When an employee earns the required certification, his or her title automatically changes, and he or she receives a standard raise.

This type of structure not only creates transparency within departments, but can also motivate employees to work harder and achieve certifications of their own.

2 Know Your Salary Ranges

Good leaders should always have a general idea of where in the salary range (low, middle or high) each of their employees is at, as well as who their top performers are.

Having this information in the back of their minds helps managers be more prepared to have conversations about salary if an employee brings it up—it also allows them to be more prepared to argue the case for one of their employees to receive a raise.

Similarly, managers should make it a point to evaluate the salary levels of their employees against relevant industry salary threshold data as part of their annual budget review process and carefully consider incorporating increases for their top performers.

Proactively rewarding a top performer in this way will always resonate better with the employee than feeling the pressure to bring the subject up with his or her manager.

3 Consider Alternative Rewards

Whether or not an employee receives a raise is ultimately a function of the company’s budget. Managers who want to reward top performers and feel like their hands are tied due to budget constraints are forgetting about all the other parts that make up an employee’s total rewards compensation package.

While increasing an employee’s salary or hourly wage rate might not be possible at the moment, perks like an extra vacation day, a one-time cash bonus or the ability to work from home a couple days a month can be just as valuable and are often a lot easier to work into a budget.

Even if there aren’t any alternatives available, simply hearing that their manager also feels that they deserve a raise can be a positive outcome.

4   Be Cognizant of External Factors

There are a lot of reasons an employee might request a raise, but one reason many managers forget about is that the employee might be asking out of need.

Maybe he or she just became a new parent, is trying to figure out how they’ll pay for a child’s tuition, is dealing with a personal health crisis, or is suffering from some other sort of financial hardship.

Whatever the issue, employees in these kinds of situations might turn to their employers for help, and fielding these kinds of requests—particularly if the answer is “no”—can sometimes be difficult or emotional for everyone involved.

It’s not necessarily a good practice for employers to give raises based purely on external factors (after all, salary increases are usually forever), but that doesn’t mean managers can’t do anything to help employees going through a tough time.

Some employers set aside funds each year for exactly these types of situations, while others might be able to organize an employee fundraiser, supply drive or other type of event benefiting the employee.

Even simply reminding the employee about other support or resources that might be included as part of their benefits package, like an employee assistance program or company wellness program, can be a great relief for employees suffering as a result of external stressors.

5 If the Answer Is “No,” Be Direct About Why

Not every employee who requests a raise deserves one, but that doesn’t mean that managers should take the request any less seriously.

In fact, these conversations can turn into a great coaching moment that allows managers to remind the employee about performance expectations or other factors that may be preventing him or her from being considered for a raise.

If the employee is serious about earning more money, this conversation might just provide the motivation or incentive he or she needs to step up their performance.

While salary negotiations may not be something every manager feels comfortable handling, it’s important to have an idea of how to respond to requests for raises—because it’s not a matter of if employees are going to ask, it’s when.

Bonnie Scherry, SPHR, is director/corporate HR at G&A Partners, Houston.