Your Employee Asked for a Raise: How to Respond to a Salary Increase Request

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?

Your employee asked for a raise, which is 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.

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 Their request for a raise will be withdrawn (or at least postponed to a better time for you)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

Common Manager Mistakes to Avoid When Responding to a Salary Increase Request

Before we run through how you can respond thoughtfully when your employees request a raise in salary, we want to help you avoid the major pitfalls. This tricky situation can trip up even seasoned managers. Let's look at some common mistakes to avoid:

Acting impulsively

When confronted with a salary increase request, it's natural to feel a surge of emotions and want to provide an immediate response. However, it's essential to resist the urge to react impulsively and blurt "Sure!" or "No way!" Trust us, this isn’t the right way to start a conversation because snap judgments often backfire, whether they resent your no, or it turns out you can’t get sign off from above on what you thought was okay. Be smart, take a breath, and then be thoughtful in your next steps. 

Not explaining a "no"

You’ve probably been an individual contributor who wanted a raise before, so you know that asking for a salary increase isn’t the easiest thing to do. Your team member was brave enough to ask, so you owe them the courtesy of a thoughtful response. 

If you have gathered all the needed information, then take time to explain the reasoning, like company circumstances or policies, behind the inability to increase pay right now. When you treat your team like adults and with respect, they’ll usually do the same.  

Breaking promises

It’s annoying and frustrating to have someone make a commitment as important as compensation and then go back on their word. Don’t be that manager. 

Few things frustrate an employee more than radio silence after a vulnerable ask, but one of those things is to break your promise if you made one. 

And these promises go beyond if you said you’d give X raise by Y date. Failing to follow up within the timeline you set, or forgetting altogether, can breed resentment and frustrate your team member, too. Honor the process you outline, even if the final answer is no. Consistency and reliability are qualities that every good manager should uphold, because you want the same from your team members.

Dodging the difficult conversation 

One of the signs of bad managers is that they don’t like to deal with people. You need to understand that the effectiveness of your leadership hinges on your ability to engage in challenging conversations and resolve them effectively. 

Avoiding the topic of increasing your team member’s salary for weeks or months isn’t professional, especially if they’ve been polite and reasonable in how they made the request. It’s up to you to steer the conversation in an effective way where they clearly understand what is and is not possible and why. You should also give them time to share their perspective, so that they feel fully heard.

Offering false hope

Providing false hope can offer momentary relief to both of you, but it's a short-lived illusion. All of this will break in the long run and will cause a big disappointment if you tell them one thing and then deliver none of it later. 

Be honest if a raise isn't possible now or in the future. Feeding vain hopes will only bring negative results and break the trust you have in them. That trust bleeds into the rest of their work and your relationship, so don’t ruin it by manipulating them by providing a false sense of hope.  

As we’ve reinforced through many of these mistakes, even if the answer is “no,” the key is addressing the raise request in a way that leaves the employee feeling respected and valued. 

Avoiding these missteps can help you have a candid dialogue while protecting the relationship, which you can keep in mind with this simple table of Do’s and Don’ts:

Dos of Navigating Salary Raise Conversations	Don'ts of Navigating Salary Raise Conversations
Take time to gather information before responding	React impulsively or emotionally
Provide growth opportunities if a salary raise isn't possible	Leave a "no" unexplained
Follow up within the timeline you outline	Break promises around follow-up timing
Have an open and compassionate dialogue	Dodge difficult conversations
Leave employees feeling respected and valued	Offer false hope about future raises
Leave employee feeling respected and valued	Explain the reasoning behind a "no" thoroughly

What to Do When Employee Asked for a Raise

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.

It's not you, it's me

If an employee asked 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 employee asks for a 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:

• Learn how to use What and How questions to get more insights and productive conversations with your team.
• Find out why learned helplessness is one of the biggest problems any manager faces.
• Build the skill of curiosity and asking good questions like great leaders in film, tech, and food.

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 that 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 an employee asks 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. If an employee asked for a raise, use growth and new opportunities to help you both in the short and long term.

Further Reading:

• Get dozens of ideas for how to grow your people when there is a lack of growth opportunities at the company.
• If you've never had a career conversation before, then take a look at how to support team members to achieve goals.
• Learn why great leaders like Richard Branson believe deeply in promoting from within. 

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, and has opulent offices with an in-office chef and free snacks galore, it's going to be a lot harder to say no.

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:

• Your culture starts at the top and affects everyone in your org. Learn from the mistakes of Wells Fargo's toxic culture here.
• How you spend money is one of many questions to ask a CEO to ensure a healthy company culture.
• If you want to turn around culture issues, start here.

Putting our Advice into Action for You

It's one thing to read this advice, and another to put it into practice with your team. 

To help you translate our guidance into tangible actions you can take, we've created sample scripts and an email template that you can use when you’re faced with how to respond to a salary increase request. 

With these handy tools in your arsenal, you'll be equipped to have a healthy discussion and make fair decisions about your conversation. Whether you're a first-time manager or a seasoned veteran, we hope these resources empower you to take the strategies we outlined and make them a reality.

Sample Scripts for Common Raise Conversations

Here’s a few common situations when it’s not surprising if your team member asks you for a raise. 

For each scenario, we give you a couple of lines you can use. They’re designed to give you a framework to get started; adapt them to fit your personality and leadership style. 

Your Employee asks for raise due to workload

If your employee has really been going above and beyond, or been called on repeatedly to save the day more than others, it’s fair for them to ask about compensation. If that’s not an option at this time, consider helping them by saying: 

• "I appreciate you coming to me about this. I know you've taken on more responsibilities lately. Let's take a look at your work load and lighten the load for you. Unfortunately, policy dictates raises come only at review time, but I'm happy to explore other ways we can recognize your contributions."

Your Employee asks for raise after certification

In some roles, certifications, degrees, and credentials make a big difference. They can take months or years of hard work outside of work hours to get, and so it should not surprise you that when they graduate or receive those hard earned credentials, they may request a raise. 

In this case, you should be on top of when this is happening and plan ahead. Check in with your boss or HR and find out company policy on how such credentials are handled. This way, you have an answer ready when they ask. 

Even better, if your company has a policy of automatically bumping compensation, you can surprise and congratulate them with the good news as soon as you know they passed/graduated. Try something like this: 

• "Congratulations on earning your certification! That's an impressive accomplishment I know you worked hard for. I’ve checked with HR already and here’s how compensation works for you in the short and long term now that you have it…"

Your Employee asks for a counteroffer to match another job offer they have

Surprise. We advise against making a counter offer. By the time they have another offer, it’s too late. 

Data shows that even if you were to successfully retain them by making a great counter, they won’t last long, nor be very happy:

• According to research by LiveCareer, about 57 percent of all employees who accept counteroffers change companies within the following 24 months.
• Other research shows that 50% of candidates who accept a counteroffer are back in the marketplace looking again in just two months.

Instead, at this point, shift the conversation to learning and transitioning:

• “I’m sorry to hear that, but I understand your decision. What advice would you have for me that might prevent others from wanting to leave as you did? And how can we work together to make this a smooth transition for all of us?”

An Email Template for you to Request Raise Info from HR

Good leaders anticipate issues and are proactive when new ones arise. That means leveraging the support you have available to you to answer tough questions like compensation.

Whether you source data from the market, ask your HR team, or go up the ladder in your department, taking time to ask for compensation data allows you to give thoughtful, realistic answers to your team. It also shows you where you can go to bat for your team if there’s some wiggle room or opportunity for you to advocate because your team member really deserves it.

Subject line: Request for compensation data

"Hi [HR contact name],

[Employee name] approached me about receiving a raise. In order to respond to their request accurately, I wanted to request current compensation data for similar roles in our company and industry averages, as well as any policies I should be aware of to manage their expectations on amounts, timelines, etc. 

I’m interested in data including things like:

• Salary range for [employee's position] at our company
• Salary data for comparable positions at other local companies
• Budget and policies around raises (timing, amounts, leveling, etc)
  

This will really help me have a thoughtful discussion with [employee name]. Please let me know if you need any clarification or have additional info that could be useful context. Thank you!"

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.