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Business

As labor pool tightens, more employees are requesting raises, survey finds

While companies can't always grant a pay boost, they should hear employees out and be able to explain their compensation policy, experts say.

When employees ask for raises, hear them out

When employees ask for raises, hear them out and check where their compensation fits before making a decision, experts say. Photo Credit: Getty Images / iStock / Andrey Popov

With the low unemployment rate and tight labor pool for certain skilled candidates, more employees are bullish about asking employers for pay increases.

In fact, 52 percent of chief financial officers said that the number of requests for raises and/or promotions has increased from two years ago, according to a recent survey from Accountemps, a division of staffing firm Robert Half.

While every firm might not be in a position to dole out raises, it’s important to not just deny the request, but have an open conversation about compensation to help set expectations and avoid losing top talent.

“There’s sensitivity whenever you ask for money,” says Rich Deosingh, New York regional vice president for Robert Half. “A great rule of thumb is to listen to your employees and acknowledge their point of view.”

Still, it pays to be proactive even before they ask and prepare for the conversation, he says.

Resources such as the 2018 Robert Half Salary Guide (roberthalf.com/salary-guide) can help managers benchmark salaries and better understand what the market’s paying, he says.

You can also opt to have a compensation study done, says Rick Maher, president of Hauppauge-based Turning Point Human Capital Management LLC, an outsourced HR firm.

It could be tailored by position, size of business and geography, he says, noting it will help employers understand where they are in comparison with the market.

This way “they could put actual numbers and business logic to their compensation numbers when employees come to talk to them,” says Maher. So if for example an employee is overpaid for their position in the marketplace, it’s easier to explain that when they request a raise, he says.

“The compensation study can be the bad guy if it has to be,” he says, noting you might explain “we’d love to give you a raise but we’re already paying more than the marketplace.”

If the employee is a top performer, the company is faced with the decision of having to perhaps stretch its budget or explain why they can’t honor the request, Maher says.

Just be sure to hear employees out before just outright denying their requests, says Steven Politis, chief operating officer at Alcott HR, a Farmingdale professional employer organization.

“There’s never an automatic no,” he says. “You have to listen to them.”

In certain cases, you mihht even ask them to justify it, Politis says. See why they feel they deserve the raise, he says.

If you need time to think about it, don’t make them wait very long, he says. Give them a timeframe for when you might make your decision.

Conducting performance reviews at least annually helps with decision making, says Singh, noting it gives employers the ability “to recognize employees for their great work, but at the same time it gives you an opportunity to highlight areas where you need to see improvement.”

Still you might not be able to offer additional compensation and may need to consider other options. For example, if an employee gives you a customer referral, pay them a percentage based on that new customer acquisition, Politis says.

You could also offer them additional perks such as extra time off or flex time.

Regardless of what you decide, it pays to have a communication strategy around pay, says Lydia Frank, vice president of content strategy for PayScale, an online salary, benefits and compensation information company in Seattle.

Help employees understand how you pay, what you pay and why you pay that way, she says. In many cases, employees may not be underpaid, but feel underpaid.

“There has been a big disconnect between employers and employees when it comes to pay fairness and the perception of pay fairness,” she says, noting only one in five employees feels fairly paid.

 

Fast Fact:

85%

Percentage of managers who have confidence in their ability to explain the rationale behind pay decisions to employees  

37%

Percentage of organizations that share that confidence in their managers

Source: PayScale 2018 Compensation Best Practices Report

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