To ensure raises don’t backfire, try this four-step method

by on March 25, 2011 · 0 Comment POSTED IN: HR Cafe

Employers who put the brakes on salaries during the recession are looking at handing out raises this year, now that the economy is going a little better.

But if you don’t carefully manage expectations, you could end up – perversely – making folks unhappy even as you seek to reward them for sticking out the hard times. Why? That raise that seems fair to you may look Scrooge-like to the one who’s getting it.

Here’s a four-step process you and your line managers can use to avoid misunderstanding when discussing raises with employees:

1. Know the market rate
What’s a fair raise for a senior IT person in her fifth year with you? Suppose you know that in your area, such people earn $75,000-$90,000. If your person is making $72,000, you’ll be on defensible ground if you offer a $4,000 raise (5.5%), both putting her in the market bracket and leaving room for further increases as business conditions and her performance permit.

2. Delink pay and self-worth
Employees tend to feel devalued by a small raise. Suppose you can only afford to give your IT gal 2%. Point out that while her work was great, and bodes well for her future, the company’s performance was only average. In other words, the raise’s size isn’t about her.

3. Level with them
There’s another possible reason for a small raise, though: Maybe some employee’s performance was indeed just average. Tell them. It’ll both defang their objections and let them know what they need to do this year.

4. Set the stage
Give the person the necessary info to form realistic expectations for the future. You might tell your IT person, for instance, that if she wants to get another raise of similar magnitude, she’ll need to earn a promotion.

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