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How to explain not giving a pay rise to a star employee

In an ideal world, every time you wanted to reward a high-performing employee with a pay rise, you’d just dip into your overflowing budget, approve the raise and take them for a drink to celebrate. Alas, there are almost always limitations and other factors to consider. Sometimes it’s just not feasible!

These days, it’s common for some managers to view their employees as friends, and work environments have definitely taken a more relational turn in previous years. Because of this heightened level of comfort (and the trend towards switching jobs and careers more often), employees are more willing to ask for raises than they were ten years ago. And if your subordinate is your friend then saying no is hard. ESPECIALLY if they are a rockstar employee.

Here’s the best way to deal with the challenge…

1. Listen to their case in full

Before making a decision about the raise, it’s good to know why the employee thinks she deserves one. Does she believe she’s underpaid relative to the market? Has he taken on new responsibilities? Has he accomplished something worthy of a bump in pay? You don’t want to say no on the spot and risk offending your employee, so hear what he has to say.

Let him point out all the reasons he feels deserving of a bump in pay. There might even be projects he’s worked on that you’re not aware of that could change your mind. But even if there isn’t, the very least you can do for employees who muster up the courage to ask for a raise is give them your full attention and seriously consider their side.

By listening to your employee’s case, you’ll not only gain insight into her values, you may also discover you were unaware she’s done something that deserves some form of recognition. While your employee’s accomplishment may not warrant a raise, or you may not have the means to approve one, having more information about your employee’s performance will allow you to recognise her in the future, or in different ways now.

2. Take the right amount time to consider their request

When refusing a raise, it’s very important to be aware of the employee’s feelings and how your “no” will come across. Being too quick to say no may give the impression you don’t value the employee, and you don’t want them to think that. When you take time to consider the request, however, it shows you genuinely value them, even if your answer will be no.

On the other hand, taking too much time to consider the request could cause your employee to believe you’re dragging your heels because you don’t care. You want to take enough time to appear thoughtful but not neglectful.

3. Be prepared

Your employee will be presenting his case in the best light possible, so make sure you go through his history to check performance for yourself.

Has he already received a raise, and why? Combing through his file will help you have clear facts to determine why he may or may not be worthy of a raise. Jot down points to support your case so you can refer to specifics during your face-to-face.

It’s safe to assume your employee has done a lot of research involving salaries. So you need to make sure you’ve done your own. Search to see what other employers are paying for similar work to the one performed by your employee. Is the pay competitive? If your employee’s earnings are comparable to what’s currently being offered in the market, you can cite this as a reason why he doesn’t deserve a raise at this time.

Once you’re armed with all the facts—including your employee’s overall job performance, his salary demands and the market rate for his position—it’s time for a meeting where you can let your employee know you thought about this and did your research as well.

Presenting him/her with facts will help illustrate why a raise won’t be granted. Referencing reputable data also helps avoid making you look like the bad guy, which is vital since you still have to manage this worker in the future.

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4. Give them more than just a ‘no’

Just telling your employee no without further rationale will leave her with more questions than answers, especially if you allowed her to make a case to you to begin with. By providing a reasoned rationale for the refusal, you continue to show your employee respect. In explaining your answer, you’re also able to give constructive feedback that can help her earn a raise in the future.

It’s also important to affirm the employee’s value to your company. If she’s taken on additional responsibilities, for example, you’ll want her to be aware of your appreciation. Ultimately, you don’t want this refusal to damage the employee’s engagement or loyalty levels.

5. Be kind but straightforward

If there’s a specific reason the employee doesn’t qualify for the raise at this time, be honest about it. Also, let your employee know what he can do to potentially qualify for the raise later on. Don’t sugarcoat or fluff your answers. Be kind but don’t be afraid to tell your employee exactly how it is. A good employee will generally appreciate the feedback and honesty and hopefully make the necessary changes.

6. Offer whatever support you can

A good leader wants to see her employees succeed. You may have to turn the employee down this time, but by offering to help him do what it takes to get a raise in the future you’re showing that you believe in the employee and genuinely see potential in him to get where he wants to be. A good employee can’t help but appreciate that. Before you let your dejected employee leave your office, it’s up to you to dispense some good career advice.

Make it clear he occupies an important position on the team, and offer tips on how to boost future performance to ensure a raise at the next employee review. If done correctly, you will be creating a more invested employee whose raise request was not rejected, but merely postponed to a date in the not-so-distant future.

Rejecting an employee’s request for a raise can certainly have negative results. So base your decision on facts, while still treating your employee compassionately, and motivating him to try harder to score a raise the next time.

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