It actually takes a lot of courage for an employee to front their boss and ask for a pay rise.

They have probably been thinking about it for a while, which is dangerous, because it means that they are generally not happy about the state of affairs and this can leave to perceptions of an effort/reward imbalance and intentions to leave.

Perhaps they are a total pain, with visions of grandeur and really not very good at what they do (although they believe they are) and really if they left, you would be super happy!

But mostly employers find this situation very difficult; as they don’t want to lose really good team members but may not be in a position to offer pay increases, or actually just don’t have an idea on what they should offer.

Here are some considerations for you to think about:

• Generally, the cost of living increases each year – this means that the amount of goods that $2 bought yesterday cannot be purchased today with $2. Therefore in real terms, if you have not given your employee a pay increase for 5 years, they are actually earning less than they were 5 years ago.

• Wages keep increasing (generally). This means that if you went to employ a new person today; in the same role, you would most likely have to pay market rates, to attract applicants – this may be more than you are paying your existing person.

• Your existing person is looking at what other similar jobs are being paid and starting to realise that they are at a disadvantage by staying with you.

OK, so your employee is now feeling a little angry about the pay inequity and has gathered the courage to come and speak to you about it.

Here are some thought concepts to help you:

• You want to keep your valuable staff; so don’t let their remuneration slip below market rates, where they can see more opportunities for themselves outside your business.

• If market rates are difficult for you to pay, you will have to consider some other payments you can make – work/life balance for example – don’t assume that this is not of great value to some employees – work your package!

• Understand that yearly wage increases have an annuity problem – meaning that if I give you a 5% increase today, I will actually be paying that, year on year for the rest of your employment with my organisation.

• Understand that employees see yearly pay increases as a right and do not see them as linked to performance. You can say ‘I am giving you this rise due to your stellar performance this year’; but in 6 months they will have forgotten it was about performance; now it is just part of their salary.

So what can you do?

• Be much smarter about the way you structure your remuneration – what percentage is pay for position and what percentage is pay for performance?

• Make sure your employee has total clarity over what they have to achieve in their role, in order to increase their pay with discretionary bonus amounts that are linked to performance.

• Organise a cyclical structure; linked to performance that you will run each year to ensure you are addressing any issues before your employee does.

• Talk to a HR specialist who can assist a workable remuneration structure for you (CIRCLE HR)

Back to that cold frosty morning, when your staffer walks in and says ‘I want a rise’ – what do you do?

Say “ok, I want to look into that for you. Lets do a review of your role and performance – how’s next Tuesday?”

“Let me gather all the information and then we can work together to see what is a suitable outcome for all.”

Be smart. Think about your structure. Get the professionals on the line – CIRCLE Recruitment & HR!

For more HR or staffing help contact CIRCLE Recruitment & HR or call 1300 923 000

Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.