I'm the owner of a very small startup in the IT sector of Germany. Very small means 3 people getting a salary: 2 of them are founders (including me), and 1 employee.
The employee is still very young (in his early 20s), and hardworking. This is true for the office time between 9am and 6pm, he doesn't work in the evening or on weekends, but my co-founder and I are fine with that. He gets a salary that from our point of view is high for such a small startup, especially when taking his age into account. Before us, he has worked for a few years for a large company (think of the typical large company: Much bureaucracy, less interesting work, … typical 9 to 5 work).
Now he has finished his first year, and I am very confident with his work. Hence, of course, I want him to stay. However, he has asked for an increase in salary, because "this is what he knows from his previous company", and he says that he thinks he deserves it.
On the one hand, I understand that he feels this way, and that this is what he is used to.
On the other hand, I don't want to raise a salary, just because 12 months have passed, since then we will have the same thing again in another 12 months. I would rather couple an increase in salary to another factor, such as achieving outstanding results. Mind you, his work is really well, but doing his work is actually what he is already paid for with a salary.
Apart from that, it would be difficult to pay even more, because we are such a small company.
So, to cut a long story short: On the one hand, I don't want to give him a raise in his salary, just because 12 months have passed. On the other hand, I don't want to simply say "no", because this might make him feel bad, and he has done really good work.
I could imagine saying something like "not now", and then working out a plan with him how to achieve this salary increase. What do you think of this? Is this a good / bad idea? What other options are there? What could / should I do?