How to respond when your employee asks for a raise

When it comes to salary negotiation, often Singaporean employers are unaware of the employee's thoughts toward their pay until they receive a knock on the office door.

When this happens, consider these tips for managers on handling a request for a higher salary.

Here are five ways to respond when your employee asks for a raise.

1. Treat the pay rise request seriously

Many employers’ initial reaction to a request for a pay rise is to say ‘no’. However, even if the question comes as a surprise to you, it doesn't mean you should act on impulse.

The first thing to do is treat it seriously. How much an employee is getting paid can be representative of the value they think the company has of them and therefore is important to their motivations.

A good manager should have an idea of how the employee has been performing, although it’s also incumbent on the employee to have an idea of the value they provide. Sometimes they don’t see eye to eye, but it’s all part of the negotiation process and managers should be up for that discussion.

A useful tip is to hear the reasons why an employee thinks they deserve an increase to their salary. Additionally, establish the parameters around the role and your own expectations, making sure the employee understands what is required to earn higher pay.

Geraldine Hor, Recruiting Associate Director at Robert Half Singapore has more than 10 years recruiting experience and has advised countless employees and employers on how to navigate requests for salary increases. She says taking the request for a salary increase seriously is step one but it is important to recognise this as a positive opportunity for growth in the business.

"Start by scheduling a one-on-one meeting and listen actively. Allow your employee to share their reasons for requesting a raise. This will help you understand their perspective and motivations."

2. Diffuse the stress of the situation

Understand that a pay rise request can be a stressful proposition for an employee. Often they have built up a bank full of grudges and grievances about not being recognised before asking for a raise and their emotional state during the negotiating process can unhinge the situation.

For both the employer and employee, it’s best to conduct salary negotiations when neither party is emotional. To help remove the emotion, many organisations offer regular performance-monitoring systems, such as a six-month performance review, where both employers and employees can discuss salaries in relation to work.

Alternatively, granting annual bonuses in return for completed KPIs is another way the employees can feel rewarded financial for the work they have performed.

That said, there are times when a salary review isn't possible within the formal review process and managers should indicate to employees at that time if it's the case. In large companies in particular, there are often restrictions during the formal process so any grade raises or adjustments to salaries are handled separately. Employers should look to schedule these meetings at an appropriate date.

In addition, avoid handing out extra pay after winning a new contract or customer. Having a regular and transparent process with regards to awards will help manage the build-up of emotion.

3. Consult a Salary Guide

Make sure you understand what the standard for the employee's role is in terms of pay before entering into negotiations.

Compare the position against a relevant Salary Guide, as often an employee may not know what they are worth and they may already be receiving a wage above the industry average.

Using a Salary Guide can help leverage your argument. Likewise, contact a recruiter or your HR representative for advice on the current salary benchmarks before making a decision.

4. Review the employee's past performance

When it comes to pay hikes, past results count more than promises of future performance.

It’s always best to pay on past performance, with an option that if the employee achieves a target, there’s the opportunity to earn a higher salary.

In addition, extra pay should come from doing work above and beyond an employee’s defined role, and not simply fulfilling the contract.

Employers can also look at basing pay not only on individual performance, but also on how the employee adds value to the team. In this instance, an employer needs to make it very clear that company values, KPIs and teamwork will help the employee achieve their financial aims.

5. Offer an alternative to more money

Often an employee asks for more money because they feel they are worth it or feel they have not been recognised for their hard work.

If the company is not willing or able to fork out more cash, then offering the employee perks could be a better option. These could include allowing the employee more flexible working hours, training or a new position where they feel their skills can be better developed. Keep these alternatives on the table during negotiations.

Geraldine says, "If a raise isn't feasible at the moment, communicate this honestly. Explain the company's compensation structure, industry benchmarks, and/or factors that influence pay decisions. This helps employees understand the rationale behind your response and fosters trust in the process. At the same time, if feasible, provide a roadmap for what the employee can do to earn one in the future. This allows employees to track their progress and provides opportunities for merit-based increases over time. If a salary increase is currently not possible, explore alternative forms of recognition such as performance bonuses, additional paid time off, or professional development opportunities."

What happens after the salary request?

Once you and the employee have had a discussion, it is imperative you get the agreed terms in writing. Then, you must follow up to ensure you and the employee are on the same page in order to move forward.

Geraldine advises, "after the initial conversation, continue to provide feedback and monitor progress. Regular check-ins show your commitment to their development. At the same time, maintain consistency. Ensure that your approach to pay raises aligns with company policies and guidelines."

By treating a pay rise request seriously, being transparent, and balancing the needs of the business, Singaporean bosses can ensure a positive salary negotiation process.