Facilitating Remuneration Conversations Effectively
It is not uncommon for Managers and Employers to feel caught off guard when a pay raise is requested by their employee/s. Leading a remuneration conversation is often a daunting process for most people. For this reason, it is important to recognize the courage needed and the potential anxiety of the employee who made the request throughout your request handling process. To provide the support that is required, it is crucial that employers and management understand the remuneration review process.
If handled incorrectly, remuneration conversations can reduce employee morale and cause talent to exit your organization. These consequences can be severe for small businesses.
To assist employers and managers, we have formulated the following step by step process to ensure you are equipped with the knowledge needed to handle and lead remuneration conversations.
Don’t Be Reactive
An instant “no” or an “are you serious?” comes across as disrespect towards your employee and makes them feel unheard.
It is important not to say yes without evaluating an employee’s current pay rate and how much of an increase you can provide. Furthermore, this puts you in a tricky situation should you realize that a pay increase is unfeasible.
Consider the Employee’s Reasons and Viewpoint
Listening to your employee’s reason and viewpoint is important not only for showing genuine care and respect, but also for determining the motivation behind the request. There are many reasons an employee may seek an increase in their remuneration. This may include but is not limited to;
- They don’t feel their work is correctly remunerated.
- Someone in a similar position is paid more,
- Their position is advertised with higher pay at similar companies,
- Struggling to meet financial obligations due to personal and family reasons,
- They’ve completed training that makes them more qualified,
- Uncertain as to whether their remuneration has been reviewed previously,
- Increased responsibilities or workload, and
- Extended tenure with company (Indeed, 2022).
By understanding the employee’s motivation, this will enable you to better handle an employee’s pay increase request, ensure you can retain talent and understand the gravity of their request.
Advise of a Salary or Payrate Review
Always inform your employee that a review will take place to ensure that their current pay rate is competitive within the industry, compliant with their Award and ensure that their pay matches their position within the organization. A general manager, HR Manager or external consultant can then undertake a Best Overall Calculation (i.e., BOOT Calculation) to review their current rate.
Consider the Employees Contributions, Qualifications and Experience
Handling pay increase requests it is advised that the employee’s specific contributions and qualifications for their job is focused on in order to determine the value the employee brings to your team. Ensuring your employees are effectively rewarded for the value of they bring is key to effective talent retention.
If an employee is meeting your organization’s values, is motivated to achieve, exceeding job criteria, completes additional training and is highly experienced in their role – they are the ideal candidate for a pay increase.
If an employee is not performing to your expectations, their performance is not consistent, or they are not meeting the Company’s values – they are not the employee to be reward with a pay increase. Rewarding the wrong employees creates conflict with the expectations and values you require in your workplace and can have lasting effects on culture.
Industry Benchmarking
The National Skills Commission’s annual update in 2022, revealed the number of occupations experiencing a skills shortage in Australia has almost doubled since 2021 (Martin, 2022). Furthermore, the Great Resignation has seen an increase in many organizations’ employee turnover.
With a competitive market for hiring employees, it is more crucial than ever before to ensure that your employee’s remuneration remains competitive within your industry to retain talent. It is recommended that employers review current job listings on Seek.com, Indeed and other recruitment websites to see where their remuneration offerings scale.
Review Organization’s Capacity to Support the Request
With the cost of living and business operations increasing in 2023, it is important to ensure your business can support remuneration increases (Karp, 2023). It is recommended that business owners liaise and engage with their Accountant or an external financial advisor.
Advise Employee of Findings of Calculation
If your employee is currently at the legally compliant and correct pay rate for your organization, it is important to advise them of your findings. Being transparent on how the review was completed will highlight to the employee that the review was effective and taken seriously. It is recommended a copy of the calculation overview is provided to employees as part of this step.
If the employee is successful in receiving their request, it is important to provide the employee with a formal letter as evidence of the increase taking place. This letter should contain details such as the date remuneration will change over and require the employee to sign off on the pay increase.
Explain Your Reason
Whether the request is successful or unsuccessful, employers should provide their reasoning to the employee. The employee should be able to walk out of your meeting understanding the motivation of your decision, what was considered and what it was that finalized your decision. When facilitating this conversation, language used should be encouraging and supportive.
Be Available for Questions
Should you be unable to increase an employee’s pay rate or salary, it is recommended that you provide the opportunity for the employee to ask questions. Employers should seek to advise the employee of methods that may make them more eligible for a pay increase in future. For example, improved performance, meeting KPIs, improved attendance and completing training are all opportunities the employee can seek to improve in the meantime.
If the pay increase request was denied due to business financial capabilities, it may be more beneficial to instead offer a form of small bonus.
If handled correctly, this conversation has the ability to maintain or boost morale. However, it is crucial that the employee understands that they remain a valuable asset to the company should their pay increase request be unsuccessful.
Contact the Human Resources Consulting Experts!
If you feel uncomfortable in holding remuneration conversations for any reason or would like assistance in completing your salary reviews, the experienced HR team at Bramwell Partners is happy to assist with all of your enquiries regarding human resources Brisbane wide! For a free consultation, please call (07) 3394 2311.
Our Recommended Business Financial Advisors
If you would like support in evaluating your business’s financial structure, business strategy, and capabilities, Bramwell Partners recommends the Hoffman Kelly Chartered Accountants. Hoffman Kelly has an experienced and knowledgeable team that specializes in supporting organizations and their business advisory needs. For more information, please visit their website at https://hoffmankelly.com.au/.
References
Indeed (2022). How to Handle A Pay Rise Request Professionally (with tips). Indeed. Retrieved 04 April 2023, from https://au.indeed.com/career-advice/career-development/how-to-handle-pay-rise-request
Karp, P (2023). Australian employers say ‘excessive’ minimum wage rise in line with inflation could lead to recession. The Guardian. Retrieved 04 April 2023, from https://www.theguardian.com/australia-news/2023/mar/31/australian-employers-claim-excessive-minimum-wage-rise-in-line-with-inflation-could-lead-to-recession
Martin, S (2022). Occupations facing skills shortages in Australia almost doubled in past year. The Gurdian. Retrieved 04 April 2022, from https://www.theguardian.com/australia-news/2022/oct/06/staggering-occupations-facing-skills-shortages-in-australia-almost-doubled-in-past-year
