What to do When Your Employees Ask for a Raise

It's mid afternoon. Thomas walks up to you and says, "Can we talk for a minute?"

Surprised, you invite them in to talk.

Your mind starts running through the possible things they could want to discuss. You hope it's just an innocent question as you have that meeting in 15 minutes.

As your mind races, they take a deep breath.

"I want a raise."

Now what?

When your employees ask for a raise, it's a big challenge for any manager.  How you respond can affect morale, retention, and your budget.

Saying "NOPE! End of discussion" is unlikely to end well, just as much as lying and saying, "Sure in 6 months" (and then saying that again in 6 months).  

Today, we look at tactics that can help you navigate this challenging request.

Zmqd0 ask for a raise

How to Handle when Your Employees Ask for a Raise

Now, the easy thing would be to just say, "Sure! I'll show you the money!"   They'd be happy, you might be happy. And everything would be good.

Only in the movies does that work.

Money doesn't always buy happiness.

In fact, even if you did give them a raise, it's unlikely to actually make them happy long term.

A study by Angus Deaton, a Nobel Prize winning economist, and psychologist Daniel Kahneman found something surprising:

"Emotional well-being also rises with income, but there is no further progress beyond an annual income of ~$75,000."

That number may vary in higher cost of living places, but the point is the same. Once you reach a certain level of income, you no longer worry about basic needs, and so salary isn't tied to happiness.

Get to the root cause.

If it's not about the money, then why are they asking for a raise? That's what you have to find out.

Best of all, when you find and treat the root cause there's a very good chance all of the following will happen:

  1. They'll be happier
  2. Their request for a raise will be withdrawn (or at least postponed to a better time for you)
  3. They will stay, and are unlikely to still go out and interview for other jobs

Here's what to do when they ask for a raise:

ask for raise, they may be annoyed by something

1) Find out what's bothering them

Think back over your career. When you've either asked for a raise or changed jobs (that likely included a raise), what happened?

Chances are you said to yourself or a friend, "I'm not paid enough for this..."

When you feel that way, you're not alone. In fact, in a survey by Michelle McQuaid and TellYourBoss.com 2/3rds of employees would prefer a new boss to a pay raise.

ask for a raise a manager can fix things

It's not you, it's me.

When someone on your team comes to you to ask for a raise, there's a pretty good chance it's at least partially your fault. People leave managers, not companies, after all.

It could be something you did, or something you haven't been doing.  Or it could be a problem you haven't fixed that's bothering them.

When it comes to figuring this out, start by asking them. Your 1 on 1 with them is the perfect time to have a candid conversation about these issues if you're not able to dive in right when they ask you for the raise.

Not sure where to start? These questions can help reveal issues that are frustrating or bothering them: (and many more 1 on 1 questions here)

  • What's your least favorite part about your job right now?
  • What's one thing we could do to improve how our team works?
  • Do you feel over-worked, under-worked, or just the right workload?
  • Are there any aspects of our culture you wish you could change?
  • Is there a situation you'd like my help with?

Ask them questions like the ones above, then really listen. Don't assume you know what they mean after a short answer.

Ask follow up questions and use active listening skills to make sure you fully understand the issue. Only after that are you really ready to start working together on solutions.

Further Reading:

ask for a raise, maybe they're bored

2) Refresh their role & responsibilities

When work is no longer a challenge, it can feel like a chore. When you're bored at work, it's easy to start having problems bother you more. Mastery of your role can also make you feel like you should ask for a raise to reflect that skill building.

As the manager of someone who requests a raise, their growth and responsibilities is a great non-financial way to address the issue. Study after study after study has shown growth is the #1 perk people want at work (even more than money!).

Especially in this situation, new responsibilities can provide multiple benefits:

  • You can add help on projects that were previously lacking resources.
  • A stronger case can be made for a raise at evaluation time.
  • Their focus shifts from their ask for a raise, to the new challenge.

Growth != Promotion

One of the fears we often hear from managers about growing their people is that they can't promote everyone.

Whether it's the nature of the role, or the structure of your company, there's not always an easy or obvious way for people to climb the proverbial ladder. In an ideal world, you'd promote everyone deserving, but in the real world, you cannot.

Instead, focus on alternative forms of growth. There are many ways to grow your people without promoting them:

  • Introduce them to a mentor further along in a similar career.
  • Buy them a book or course to learn a new skill that applies to their current job.
  • Empower them to take on a project to fix an issue important to them.

This 3rd option is particularly powerful when they ask for a raise. Not only are you then providing them a growth opportunity, but you're helping them fix the issue that's frustrating them.

Your ability to grow your people is only limited by your own creativity, and willingness to experiment. When someone asks you for a raise, use growth and new opportunities to help you both in the short and long term.

Further Reading:

when they ask for a raise make sure they see the whole picture

3) Check your culture and bring alignment

Are you transparent about your company's situation?

If you're struggling and tell them, your employee looking for more money will be more amenable to waiting for a raise. Similarly, if you're raising your next round of funding, you can talk about a raise once your company closes it (this is common for either right after series A or B rounds of funding)

Meanwhile, if your company is posting record profits, has opulent offices with an in-office chef and free snacks galore, it's going to be a lot harder to say no.

how you handle money shows what they expect when they ask for a raise
When your office looks like this, it says a lot about how tight you are with money

What does your office say about you?

Two years ago, Talia Jane shook Silicon Valley with an open letter to her CEO. In it, she talked about struggling to make ends meet while working out of snack-filled, fancy offices at Yelp:

"Every single one of my coworkers is struggling. They're taking side jobs, they're living at home. One of them started a GoFundMe because she couldn't pay her rent... Another wrote on those neat whiteboards we've got on every floor begging for help because he was bound to be homeless in two weeks.

Another guy who got hired, and ultimately let go, was undoubtedly homeless. He brought a big bag with him and stocked up on all those snacks you make sure are on every floor...Yelp could save about $24,000 in two months if the company stopped restocking flavored coconut waters since no one drinks them."

Jane clearly pointed out the hypocrisy of Yelp's many perks. It was readily apparent the company was spending much more on snacks than compensation for her and fellow customer support agents.

While this is an extreme situation, it points out the hypocrisy you could be facing. If your company appears to spend money freely, it will be assumed that extends to compensation. It will be much harder to say no, if it looks like paying them is the only place you're frugal.

If your company is in this situation, there's really only 3 options:

  1. Give them a raise to be consistent with your spendthrift culture.
  2. Say no, and demonstrate in your actions the company is cutting costs in many areas.
  3. Say no, and be prepared for them to go interview and get competing offers.

Whatever your company's culture on spending money, keep it in mind as you have conversations about raises. Your employees definitely will.

Further Reading:

When your employees ask for a raise, it's always a tough conversation. However, with good self awareness and the right approaches, you can safely navigate a situation that can otherwise lead to turnover.

Want help? The best way to prevent these kinds of issues is to be a good manager from the start. Lighthouse is purpose built to help you be a great leader by building and keeping the habits of the best. Start your free, 21 day trial now here.

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