How to deal with salary negotiations

Alan Price – CEO at BrightHR

February 01 2016

The ‘annual pay rise event’ is often an expectation among employees – the cost of living rises and consequently, they think that they should see a corresponding increase in their pay packets. But do you have an obligation to inflate their pay, and if not, how do you evaluate whether or not a pay rise is appropriate? There’s no legal requirement to offer your staff a salary increase, so only businesses that have stipulated parameters for a pay rise in their employment contracts are under obligation to see this through. Therefore, pay rises in the private sector are generally down to a manager’s discretion – but employees may take the initiative and apply for a pay increase if they feel they’ve done something to earn it. Pay rise requests – things to consider If a member of staff has approached you to ask for a pay rise, it’s likely that you’ll enter into a negotiation process to determine an appropriate increase that will satisfy both parties. As the employer, you’ll be aware of what your annual budget is, and therefore, what room for manoeuvre you have – but this can sometimes be at odds with a salary increase request from a valuable employee who you want to keep! Be mindful of not inflating an employee’s pay disproportionately – while this may make them (and therefore you) happy in the short term, it won’t work in the long run. Other employees will soon catch on and demand a similar increase... and with those budgets in mind, it’s likely that you won’t be able to keep up. In order to keep your maximum increase realistic, you need to find a benchmark – here are a couple of things that will help you to make an assessment:
  • What’s the ‘norm’ for their position? A salary survey would give you up to the minute information on what your industry pays for the different roles in your organisation. Could the employee realistically get a job with a competitor for more money? If so, are you prepared to risk losing them?
You should also consider the employee individually in order to assess their worth:
  • Have they made a significant contribution to the productivity of your organisation?
  • Have they made you huge savings?
  • Have they proved to be a key employee?
  • How long have they been with you?
Whatever your method for deciding if a pay increase is to take place, you should communicate clearly with the employee. Avoiding the issue will suggest to the employee that you consider the topic to be taboo, and that you may be hiding something. Manage the employee’s expectations so they know from the off what you may be able to achieve. If you deem an increase is appropriate but you can’t fulfil their request in one go, agree a partial increase and then confirm that you will review the situation again in a few months’ time. Don’t promise something that you can’t provide – not only will this create animosity, it could also constitute a breach of contract. Finally, ensure you can provide evidence to explain any disparity between individual employees in the amounts of increase you provide – particularly if the disparity is seen between pay increases given to men and those given to women. For more information on this issue, please call our advice service on 0800 028 2420.  

Suggested Resources