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Negotiating the salary – What to do when an employee asks for a pay rise

Negotiating the salary – What to do when an employee asks for a pay rise

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15 days ago by Sarah Ferraina

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Negotiating the salary – What to do when an employee asks for a pay rise


The conversation around pay rises is often clouded with employee angst and emotion. This only adds to what can already be a tricky situation for employers, particularly if they were not expecting the request.


To help remove the stress for both parties, it is highly recommended that a clear and regular process for salary review be established – usually taking place every 6-12 months.


That said, it isn’t always possible to keep these discussions to a formal review process.


Here are a few tips to consider when responding to a pay rise request from your employees:


  1. Be very clear on what the employee is currently earning. This includes clarifying if super is inclusive, what bonuses have actually paid (not just the potential) and the last time they were awarded a pay rise – it might have been very recently.

  2. Know your facts internally. If you use salary bands or if you are looking for consistency, ensure you are across this. Also consider the relativity of the employee’s pay to others performing the same job and the desire to retain the employee.

  3. Know your facts externally – i.e. the relativity of the employee’s pay to market rates. There are a number of external resources that can assist with this.

  4. Consider other incentives in lieu of a pay rise if you can’t meet the salary request but don’t want to demotivate your employee. It has been found that remuneration isn’t the only factor linked to employee satisfaction. In fact, it is often lower down the list compared to quality leadership, a positive organisational culture and work that is fulfilling and enjoyable.

    SEEK conducted research into the topic of salary and benefits to understand the factors candidates and employees consider to be valuable if a pay rise is not available. Popular incentives included:
  • Flexible hours (working from home in particular was more likely to appeal to females than males – 29% compared to 14%)
  • Extra annual leave
  • A monthly rostered day off
  • Paid training or professional development
  • The report also found that higher income earners (>$83k pa) would be more likely to be kept happy in their current role with a promotion (27%). Meanwhile lower income earners (<$83k pa) are more likely to appreciate a day off for their birthday (20%) or having fruit/snacks available (10%).