It takes a lot of self-confidence for an employee to approach their employer for a raise — and a lot of decision-making confidence as an employer to decide which reasons to to give and employee a raise or not.
There’s no playbook for managers and business owners to know how to gauge whether an employee deserves a raise or not. Deciding whether an employee deserves to earn more can be approached in several different ways. From the addition of value to the team support they provide, each plays an integral part in determining whether a raise is warranted — but there are other factors to consider as well. That’s why we asked 10 entrepreneurs from Young Entrepreneur Council (YEC) the following:
“An employee has recently talked with you about getting a raise. What is an important factor to consider before deciding whether or not to give them one? Why is this factor so important?”
Reasons to Give Employees a Raise
Here’s what YEC community members had to say:
1. How They Have Improved
“A raise should be about improvement. What has the employee done in the last year to add to their skills, increase their knowledge or generate higher quality work? Look at these factors to determine if they should get a raise.” ~ John Rampton, Calendar
2. Their Value to the Company
“Obviously to know whether or not to give an employee a raise, it helps to understand the degree of value that they are bringing to your company and recognize the level of it. Are they an A-level employee, do they take on challenges with minimal complaints, do you see them getting a promotion potentially in the future and see the place they can eventually get to?” ~ Nicole Munoz, Nicole Munoz Consulting, Inc.
3. The Skills They’ve Picked Up
“Find out if your employee has made use of any training opportunities that you offer or if they’ve learned something new on their own. New skills and familiarity with your business processes makes them valuable and hard to replace. Consider their skills and how they can contribute to help you make a decision regarding offering a raise.” ~ Blair Williams, MemberPress
4. Shared Values and Company Vision
“It is very important to evaluate if this employee has a conviction and is committed to the company, if he or she shares its values and this is reflected in his or her productivity and daily tasks. Does he or she bring value? Does he or she generate profit and benefit the company? In what way? One must prioritize and reward the most loyal and effective employees, so the final decision will be up to you.” ~ Kevin Leyes, Leyes Media & Team Leyes, by Leyes Enterprises
5. Their Potential
“We always look at our employees as people just like us, with all of the potential in the world at their fingertips. Raises are given based on performance, but the percentage increase is wholly dependent on their potential and how much work they put in with the company.” ~ Chris Christoff, MonsterInsights
6. Their Influence on the Team
“While it may be easy to evaluate everyone by their financial output or what the market rate is for their salary, there is, many times, a deeper level of importance with key team members. For instance, some team members might not be your A-player, but they’re very well liked and motivating to the people around them, helping lift up the entire team’s productivity.” ~ Andy Karuza, FenSens
7. The Way They Ask for It
“For me, it’s all in their approach and the words they use to ask for the raise. Was it in a one-on-one meeting or a team meeting? Was it an off-hand comment or joke, or was it a serious question? Did they do any homework before asking? Have they adequately explained why they should get one? I’m more inclined to discuss it, and maybe even agree, if they’ve handled it thoughtfully.” ~ Thomas Griffin, OptinMonster
8. Their Time With the Company
“Even if someone in your company believes they deserve a raise, you need to consider everyone else before giving it to them. For example, if someone in the same department has been there longer, the raise should go to them instead. It’s important to practice fairness across all areas of business so no one can accuse you of picking favorites.” ~ Stephanie Wells, Formidable Forms
9. Timing and Motivation
“Did their financial needs grow? Did they accomplish something? Have they been with the company for a certain amount of time? Do they feel undercompensated, overworked or anything of that sort? Consider the timing and motivation before you start crunching the numbers. Sometimes the real desire isn’t even the money itself.” ~ Joey Bertschler, bitgrit
10. Alternatives to Raises
“If you’re just starting your business and your entrepreneurial career, you might not be able to grant wage or salary increases. Consider alternatives that still offer employees value, like performance-based bonuses, additional paid time off or a more flexible working schedule. In many cases, employees may actually prefer their additional workplace flexibility to a one-time pay increase.” ~ Jared Atchison, WPForms
Increase in income, if used properly, can mean company loyalty since it entails that efforts of employees are acknowledged. And yes, it may come in small incentives such as team building vacations which is not a monthly financial problem for the employer but may give-out the same morale boost for the employees.
I like the comment about influence on the team. That’s vital and hard to measure.
Also, I’m a fan of giving a raise BEFORE someone asks for it. Many people are so terrified of asking for a raise they may look for another job that pays more (crazy, but true).
Its very important to keep the employee motivated. giving a raise is a token on gratitude for the smart work contributed by the employee.