Hiring and retaining the best talent is among the most important objectives for any business owner, and paying employees a fair salary is a vital part of it. Employees are your company’s foundation, influencing its success or failure. Some business owners have the resources and expertise to do everything independently; however, some reach out to companies that offer interim management. Those organisations are specialists in transformational leadership and have the ability to grow your business exponentially.
If you are managing a group of people, then it’s likely that you are aware of the importance of knowing your subordinates. That’s why some business decisions are not entirely based on data but need a bit of human thinking. For some people, it’s hard to admit that increasing employees’ salary is a good chance.
If you struggle and are wondering whether you should give a pay rise to your employees, then in this article, we will look at why and when you should do it.
Should you give a Pay rise?
For all companies, the amount of money paid to employees each month is one of the most critical business decisions. There are plenty of factors which should be taken into consideration.
What is the business’s current revenue, and what does the future look like? What was the impact of the last pay rise on the employees, and how is your hiring process going? When making those changes, it’s important to look at all factors because employees’ salary directly impacts their performance and experience. Usually, when giving pay rise, productivity and job satisfaction significantly improve. Nonetheless, an organisation shouldn’t give pay rises just because – employees have to be able to demonstrate their value and contribution to the business.
Recognising their hard work and achievements with a bigger paycheck is a great way to boost their happiness and productivity. If employees feel valued, they are more likely to stay with the company for a longer period instead of looking for new opportunities. For example, if the market and competitors are increasing paychecks and you are not, then you are unwillingly giving them a reason to find a higher-paying position. Some organisations provide performance bonuses. It’s a good idea to reward hard workers; however, you shouldn’t rely on it.
When should you discuss a pay rise?
Many businesses set their budgets at the beginning of the year or at their chosen time. However, it shouldn’t interfere with considering a pay rise for exceptional performers. There are several opportunities to discuss it with them:
When they complete a successful project
Whether your team was working on a regular project or it was something completely new, most of the employees have gained new experience, making them more attractive on the job market. Whether planning a new project or distributing new assignments, it’s always a good idea to speak with employees about compensation for their exceptional performance.
There are many reasons employees might take on new responsibilities that weren’t on their job offers. Sometimes it’s because there have been changes in the staff count and someone had to do someone else’s work. Those decisions are usually specific to a particular organisation, so you should speak with each of your employees and find out whether their responsibilities have changed or if they feel like they are doing more than was agreed.
Three months before a review
Most employers discuss a pay rise during an annual performance review. If you are considering speaking with the employees about giving them a bigger paycheck, we advise you to do it earlier. Some business leaders believe it’s good to have this conversation around three months in advance. It shows that you care about the employees and that the pay rise idea doesn’t come only from them during an annual review.
3 reasons to give a pay rise
The increasing cost of living
As you are probably aware and most definitely it also impacts you, the cost of living is increasing everywhere. Especially now, in 2022, we can all notice that grocery store runs and gas costs double compared to a year before.
Suppose your employees are struggling with buying basic things and have to budget for almost everything. In that case, there is a high possibility that it will also affect their productivity and happiness in the workplace. For that reason, if you care about your employees and their mental health, an ability to reduce the stress associated with not being able to afford basic stuff, then it will be reflected professionally.
If your employees are smashing all of the KPIs and exceeding expectations, it’s a good idea to consider a pay rise. You can give it to a few selected employees or a whole team. However, you must remember to think about what exactly are you rewarding. Is it exceptional performance, ambitions, teamwork or experience? Moreover, if you decide to reward a whole team, it can sometimes cause problems. If someone realises that their co-worker who is doing less gets the same amount of money, then it’s likely that they will feel discouraged.
An employee asked for it
No one likes to talk about money, especially approaching a senior staff member and asking for it. When this happens, it doesn’t automatically means that you must give it to them; however, it’s suggestive that the employee feels like they deserve more. If your subsidiaries have been working hard and smashing each project with exceptional results, they most likely feel that this should be rewarded. You should invite them for a discussion, and if they can show their achievements in great detail and their plans for future development, then this decision might be easier to make.