Refusing to give a raise to an employee, while keeping her motivated

Question

An employee of mine is asking for a raise. Like many employees, she thinks she is doing very well and should get a raise.

Her current compensation package is well in the market benchmark and also when compared to other employees in the company that have roughly the same title and experience.

The employee is good (not "excellent", but "good") and she shows motivation to the work.

I don't think she deserves it right now for various reasons (that I don't want to write about them here). So I'd like to turn her down about the raise, but I would also like to make sure her motivation will not be affected. I see a potential raise about half a year from now.

What should be the best approach for that?

I was thinking about telling her the points for improvements as I see them, but my concern is that she will lose her motivation.

Answer 1

As an employee, the only thing worse than not getting a raise you think you deserve is not knowing what you need to do to get that raise.

If you have specific areas you would like to see her improve on before giving her a raise, the best thing you can do is outline it for her. Tell her what she needs to do and come up with a plan, together, on how she can meet those goals. Make sure they are specific and measurable. Then, and this is important, when she meets those goals follow through on the plan. When she earns the raise, you better give it to her, or she will become demotivated.

but my concern is that she will lose her motivation

She might, especially if she thinks she can get what she wants by taking her work somewhere else. It's a risk you take. But if she hasn't earned a raise, then she hasn't earned a raise, especially if you are already paying her the market rate for someone with her level of experience (you are, aren't you?). On the other hand, giving her specific, fair goals she can meet to earn a raise might make her work that much harder, because she will know what she needs to do. You will get a better employee who will grow, and she will know you are someone she can trust to follow through on a promise.

Answer 2

SethR's answer is excellent, but I'd like to add one point to that: You have to remain competitive with regards to what you pay your people. You should look for what someone in this person's position would be paid elsewhere before determining if she doesn't deserve the raise. She is telling you that right now her priority is getting more money. If you won't give it to her and someone else will, then she will take their money and not yours.

So, in addition to everything SethR said in his answer, I would also recommend that, if this person is being paid less than "market rate" at your company, you should at least consider giving her a raise to match market rate; failing that, she may find a market-rate job elsewhere.

Answer 3

What should be the best approach for that?

Be honest with your employee. Nothing is more unmotivating than an employer who is not open and transparent with their employees, especially when it comes to pay.

Let them know what they are doing well and what they need improvement on. Let them know the reason(s) for why the cannot have a raise right now. If there is a legitimate path to getting a raise, let them know what needs to be done and when they would be eligible to receive it.

Finally, you need to follow through as best as possible. Assuming everything goes as expected and the employee has done everything you set out for them you need to give them the raise otherwise you will at the very least lose their motivation and more likely lose them as an employee.

Answer 4

Let me ask you, if your employee quit after not getting a raise, you hired someone else in her place, someone with the same skills, paid that person the same amount - would you be getting the same value?

In 99% of cases you would be getting a lower value, because your current employee is already working there for some time, thus deserving better pay than the 'market rate', because of the acquired company-specific knowledge. Depending on the field, the difference can be considerable, and it never ceases to amaze how many employers forget about this (or they do it on purpose to just pay you less unless you mention it).

Answer 5

Also, be wary of what your upper management is doing. If you don't have the budget or the authority to grant a raise, and senior management is giving themselves raises or bonuses, then she is out the door and there is not a damm thing you can do about it. If upper management is being shitty, then there is no point in hiding that fact.

I had a friend of mine who worked in such a place. His organization had 2 openings, one of which I applied for. Then senior management pulled that stunt, and suddenly there were 8 openings. When I finally got around to talking to the hiring manager, she told me that she herself was looking for somewhere else.

Answer 6

How much will getting and training a new employee cost you ?

An employee of mine is asking for a raise. Like many employees, she thinks she is doing very well and should get a raise.

Like everyone she at least needs and deserves a cost of living increase.

She's getting nothing.

Why would she stay ?

Her current compensation package is well in the market benchmark, and also when compared to other (male or female) employees in the company that has roughly the same title and experience.

This sounds deliberately ambiguous and makes no reference to the employees ability to find better paid work elsewhere.

Raise her wages to the high end of this scale. Remember that if she's inside that range and can move on to another employee, she can expect to do at least as well if not better elsewhere.

As a "product" your company ceases to be interesting when it does not do as least as well as competitors will.

The employee is good (not "excellent", but "good"), and she shows motivation to the work.

Having a good and motivated employee is an extremely valuable asset. You would rather risk loosing that and taking a chance on a new employee than pay any raise.

Bad choice.

What will be the long term impact (even if they stay) of having a raise refused ?

I don't think she deserves it right now for various reasons (that I don't want to write about them here)

That's pretty feeble sounding. It suggests your employee would regard the reasons as pure BS and you know it.

, so I'd like to turn her down about the raise, but I would also like to make sure her motivation will not be affected.

Have prices gone up ? Inflation ? Rent/mortgage ? Transport costs ?

If your employee is facing rising costs and stagnant wages will they associate that with you ? Will they move on because they have the choice ?

Probably. At some point.

I see a potential raise about half a year from now.

Half a year's increase costs how much compared to the cost of recruiting a new good employee who is motivated ?

You are making a false economy.

That line sounds like a lot of BS rationalizations I have heard from employers which translate as "let me dangle this carrot in front of you and in six months we will do this all over again".

Employees hearing these vague promises hear "BS Carrot" alert in their head.

Six months - guarantee it in writing without conditions.

Also note that that means the employee must absorb six months of cost of living increases (an effective pay cut in real terms). That's not going to feel good and will make them less motivated and make them start looking elsewhere.

What should be the best approach for that?

Pay them something that is at the very least at the high end of a cost of living increase. That will at least look like you are trying to fair. However it all depends on what you call fair, as we do not know the employee's side of things.

You absolutely need to explain the reasons.

Forget the "you need to improve" stuff. The employee is going to be thinking "Actually you're the one who needs to improve.". Employees say these things by leaving when they're ready to.

I was thinking about telling her the points for improvements as I see them, but my concern is that she will lose her motivation.

She's already good and motivated. The problem is she wants money. There's no good outcome from not giving some.

Improvements are your self-rationalization for not giving an increase, but they won't impress an employee doing good work and who is already motivated.

What improvements will you make on your side to keep her there ?

Can you offer flexi-time, better health cover, paid leave, shorter hours ?

Employees do not get better and better just because you pay more. That's a myth. They do get worse when you undervalue them.

Answer 7

You can't control workers emotions, so it's best to make a generic excuse. In this case fairly easy as you're contemplating a raise in 6 months.

Just tell her she is on track for a raise but it can't be actioned for 6 months. This puts it off for a while with a reason that is less open to argument or emotion.

Also remember that whenever more remuneration is brought up there is an underlying understanding that a staff member may leave if they don't get it. So be prepared to replace her if you refuse the request. Personally I either got a raise when I asked for one or left, excuses and reasoning made no difference.

Answer 8

Do you have a team that works well together and delivers quality more or less on time? Is the mood good? Do people help each other, is the talk friendly, do they show mutual respect? Are they honest to each other and to you?

If yes, give them all a raise. Don't forget, inflation is 5% right now in the U.S. Even if you want to keep salaries flat you need to give them 5%. Call them together, tell them that you really appreciate the place in which you all are now, that you enjoy working with them and that you are looking forward to another successful year with them as a team — because if that's how things are, you are very profitable, as a team or as a company. A good team is a bit like a good government or a good marriage: It seems normal only until it's gone, and it is not obvious how much worse it can get if one doesn't invest in it. Don't forget to ask whether anybody wants a faster computer or a larger monitor or a height adjustable desk, even if they work from home: You have never created more employee happiness with less money than that.

Answer 9

Unfortunately there's no real way to approach this. You could be totally honest, and they still take it as an insult and leave. All you can say is no, not right now. Perhaps give a time line to a possibility and be totally realistic if such a raise is even realistic. If they want to double their current salary, then you really have to tell them it is unrealistic.

Personally I would just say no, tell them a time line if realistic of when they can expect a discussion on such a raise, and then just hope they don't quit.

Answer 10

There are two options i see that can bridge the time gap until you are ready to give her that raise.

1. Offer a training that she think is interesting and could help her career.
2. Give an aggressive goal and promise a nice bonus if she makes that goal.

Answer 11

Well, for starters, you might not be able to keep her motivated. Just because her salary is 'within market range' doesn't mean much if she's seeing that her salary is not keeping up with inflation.

No matter how things are, if you aren't adjusting salaries to compensate with inflation, your employees will not be motivated for long. They aren't stupid.

And if an employee is asking for a raise, she's already motivated to do get it one way or another, with you or someone else.

Jobs are a give a take between employer and employee, so you have to give something in return (as you know, and to your credit, are trying to figure it out.)

A salary is not something you just pegged against a 'market threshold' or against the median in your company.

Ask yourself this: Can you afford to lose her or? Or, can you afford to give her a raise (not necessarily what she's asking, but something)?

Where in the middle can you and her meet?

You mention that you see a possibility of a raise half-way year from now. Put it in writing, so that she knows you mean it (given some conditions obviously) and that should be enough.

As for conditions, perhaps you expect her to improve or change something.

Then make sure you put those in writing so that she knows them. This is all assuming she agrees with your view that she doesn't deserve a raise right (and raises aren't necessarily a function of deserving, but about cost/benefit analysis.)

Another possibility is to give her a smaller raise now, with a promise that there will be another raise next year. Again, it's all about meeting in the middle.

But to be honest, I think both of you are in a losing situation. As I said, salaries and raises have little to do with deserving, and more to do with wants and satisfaction.

You are not going to keep someone interested in denying something they strongly feel they want (or need.) And with inflation, everyone needs a raise.

If she has verbalized a request for a raise, be assured she's ready to go for plan B or C to get it.

It is up to you to decide if you can afford to lose her over a raise. Only you know your needs and business needs.

Good luck.

Answer 12

I think the most important was brought up in the comment by @J... How long has it been since this employee got a raise, or since she started working for you?

If she's been working there 10 years and has never gotten a raise, I can certainly understand a reasonable employee thinking it's about time. If she's been working there two months, it's not a reasonable request. Almost every company I've ever worked for, employees get a raise once a year, plus sometimes an additional raise if they get promoted. Sometimes there's a raise after some initial "probation period". Sometimes raises are on the anniversary of the hire date, sometimes everybody gets a raise the same time of year. If she's been working more than a year and hasn't gotten a raise, it's certainly reasonable for her to ask about it.

If she's only been there a few months and is already asking for a raise, I'd be concerned. Does she expect to get a raise every 3 months? If she's been there for several years and has never gotten a raise, if I was her I would be concerned. Will I ever get a raise?

If she's been there over a year and you can't or won't give her a raise, I'd tell her honestly why not. I worked for a company once that ran into financial problem and put a moratorium on all raised for 2 or 3 years. I understood that the company was in trouble and needed to do SOMETHING to control expenses. Not giving raises was better than laying a bunch of people off.

At most companies, if an employee does at least an adequate job, they get an annual raise. You say that she is "good" but not "excellent". Ok, so maybe she doesn't deserve a huge raise. But you could give her some token raise. Maybe something to just keep pace with inflation.

If you're not willing to do that, then I don't think there is any way to maintain morale. If I worked for a company that was doing well so they could afford to give me a raise, that management agreed I was performing at least adequately, but that refused to give me a raise because I wasn't doing "excellent", I would soon be looking for another job. Maybe if the boss said, "if you do X, Y, and Z I'll give you a raise" that I would be willing to try to meet those conditions. But if the conditions were reasonable and I did meet them, and a raise still wasn't forthcoming, I wouldn't be around long.

Oh, this assumes I wasn't way overpaid from go. I mean if most people doing this job are paid, whatever, $50k, and my previous job I was making $50k, and I was hired for $100k, yeah, I'd put up with no raise for a while.

Answer 13

Multiple Mini-Raises are a thing, too.

We have no need to deal with raises in an all-or-nothing manner. Those are hard to negotiate, hard to budget, and hard to manage.

Instead, give her a immediate, small raise and give her a set of goals to improve - tangible goals, things that she can check off and consider them "done", and tie small raises to each of those goals. Don't add a deadline - giver her as much time as she need to get those improvements goals done.

This strategy turns some of the frustration of not getting the raise right away into a tangible reward loop in which the employee can engage, you spread out the raise over the time she needs to get those goals done, and everybody is happier than a simple "yes/no" negotiation.

However, if you can't put your finger on tangible goals that she can improve to become deserving of that raise, then you have no reason to not give it to her. A gut feeling in the shape of "I think she needs more time" is useless if you can't explain why - if her performance is already good enough, then she deserves it. If her performance isn't good enough, then you surely knows why and can tell her where she needs to improve.

If you don't know why her performance isn't good enough, then it probably is already.

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Keep in mind that experience and performance are two different things. Experience works as a predictor of performance, but doesn't guarantee it. A salesman with 2 years of experience that produces 100k/month worth of sales is worth exactly the same as someone with 20 years that produces just as much. A 10-year developer that can only produce buggy code is worse than a skilled new-blood that can make nicer software in the same time.

Don't check for years of work. Check for productivity, performance when evaluating your employees. Otherwise, you'll just breed frustration for them.

Answer 14

NOTE: There is a lot of downvotes to this answer because apparently many are of the opinion that such "ill-advised" questions that attempt to "suppress" the legitimate rights of an employee shouldn't be encouraged. And thus answers, like mine, that don't question the motives of the questioner shouldn't be encouraged. To put it very plainly, I am answering this question purely from a managerial perspective. Anyone in management will recognize that OP's question is common, fair and legitimate, which can be basically summed up as:

An employee wants a promotion or raise or incentive. Management cannot immediately give it (for whatever reasons - and often there are many legitimate reasons). Management needs to ensure that rejection of such requests doesn't affect the morale of the employee.

OP's question is the same. Part of the misunderstanding against my answer also stems from an ignorance too - asking for a raise or incentive (like everything else at work) is a negotiation too. If you don't accept that, and approach it with a sense of entitlement or black and white thinking of "my way or the highway", you will just be setting yourself up for a lot of disappointment. Second, it is also a fact that some employees measure their productivity with a different yardstick, then how management does it, and thus have wrong expectations (this is however more of management's fault) - OP highlights this when she says the employee is "good but not excellent", meaning that she has a good potential for improvement. The prospect of getting a raise or incentive if you meet well defined goals in a time bound manner is an excellent way to motivate and ensure a worker improves. (In that, from a management perspective, I'd say OP is quite right to consider delaying the raise. Also, some of you need to know that sometimes such requests are denied temporarily to see how you react and evaluate your future potential - again, it may not seem fair, but this is the way the real world works).

Lastly, please also note that the success of the process I have described depends on the relationship between the boss and the employee and how the boss delivers this message. Due to the lack of non-verbal cues in the medium we are communicating through, many are reading what is written in an impersonal and cynical tone, and thus *feel cynical about my answer (there's obviously not much I can do about that).

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This is how I would roughly communicate it to her (after 2 - 7 days):

Appreciate and acknowledge her request (it is important that people know their requests have been thoughtfully considered)

"I appreciate that you were upfront and direct in bringing attention to the fact that you are due for a raise. I do understand that apart from job satisfaction, the money that you earn is also a strong motivator in any profession. And it is obviously my role, and in the company's best interest, to keep you happy and motivated."

Seek self-affirmation from her (Sometimes people do need a reminder that job satisfaction is also an important factor to consider; for the cynical this may seem like emotional blackmail, but tapping someones passion, and reminding them of it, is a great motivational method)

"So I'd like some feedback from you - are you happy with your job and the work you do here?"

(Listen genuinely to her answer - her most obvious response will be just "Yes" or something equally short, in which case you can proceed further. Or patiently listen if she adds more to that and then proceed.)

If she answered positively but didn't clarify with details, seek it out - "What part of your job, and working here, gives you the most personal satisfaction?"

(Listen patiently. If she is not able to express herself well, add more details to what she says and ask her to re-affirm it - "do you mean you enjoy it because you can complete that faster and thus feel more productive?". Both of you have to be positive and genuine about the points being raised. If the employee can't come up with anything or doesn't seem enthused about it, that's a red flag that you need to keep an eye for as a boss - it's hard to motivate someone without some passion or interest in what they do.)

"Thanks you for sharing that. As a boss, it makes me happy to see your passion as that means I too am doing part of my job well." :)

Share your concerns (most employees are ignorant on why a raise is not so easily forthcoming)

"Ok, let me be direct and honest with you too - as a boss I have to think hard before giving a raise to anyone, not only keeping the bottom-line of the company in mind, but also considering the morale of others in giving you alone a raise."

(Don't wait for any response or encourage any interruptions and proceed further).

Seek introspection (make the employee realize that any incentive is linked to productivity and performance)

"That said, the good news is that I am quite receptive to giving you a raise. However, I have some concerns regarding your work that I would like you to address first.

"I am sure you know what these are, right? I am sure you have honestly self-introspected on your strength and weakness and your performance over the past xx years before approaching me. Can you share with me the areas where you think you have lacked or not performed adequately?

(Here, it is important to make her introspect and make her spell out her weak points. This maybe uncomfortable for some people, in which case you may have to patiently and reassuringly coax it out of her. Some inexperienced individuals will be genuinely ignorant. In either case, after she speaks about it or if she says she really thinks she has given her best performance, clarify and add to what she has said and share further details on where her work can improve by giving her specific examples. Convey it in a manner that it doesn't sound like a dressing down / criticism but rather an open discussion. It is a red flag if they genuinely can't point out areas of improvements or don't believe or accept your suggestion about their job performance - entitled employees are a lot harder to train than self-aware ones).

Convey your honest action plans

"This has been a very constructive and productive discussion for me regarding your work and future here. Now, as I said before, I am quite open and receptive to the idea of giving you a raise. And I am genuine about it. But I cannot give it to you immediately for the exact reasons we discussed.

I'd like you to first address the shortcomings that you shared with me and the ones I highlighted.

This does not mean that I am asking you tick all the check-boxes to 100% perfection before you can expect a raise. But I'd like to see genuine commitment and progress from you in say, just 6 months."

"I understand waiting for a few more months may feel like a slight disappointment, but again, I am being honest when I say I am not leading you. I like your work so far, and I have confidence that you will be ready for more responsibilities with a little more effort. And that you will get a raise within 6 months if you show us actionable results to the mini-goals we discussed and set for you."

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Obviously, change the tone and language as suited to what is appropriate in your culture.

(There is nothing manipulative here when done with good intentions - it is just basic common courtesy of listening, empathising, and sharing genuine concerns. As OP expressed, sometimes, some employees do over estimate their proficiency and worth, and some honest self-introspection and feedback can correct this perception and provide scope for improvement. However, this process will not work successfully if the boss is not genuinely interested in listening to the employee or in actually supporting her. This process is also quite helpful to gauge the intentions and state of mind of an employee - it may turn out that the person isn't committed and / or interested only in money, in which case the choice becomes clearer, one way or the other.)