Over the past few years, there has been an upward trend in employees requesting pay increases. With the seemingly constant rise in mortgage rates and the overall cost of living, this trend is expected to continue throughout 2023.

If you're an employer facing this situation, it's important to handle it with care and professionalism. We understand the pressure these requests can place on employers who may not have the budget to accommodate the requests.

Firstly, don’t rush into a decision because you don’t want to say yes immediately only to crunch the numbers later and realise it’s not going to work! And secondly, you don’t want to reject the request immediately as that will likely leave the employee feeling undervalued and like due consideration was not given.

How to respond to a pay rise request:

1. Listen – It can be very daunting asking for a pay rise, so if your employee has mustered the courage to ask, the least you can do is hear out their reasoning.
2. Question – Ask any clarifying questions regarding the details of their request (not only does this ensure you understand correctly, but it shows the employee you are seeking to consider their request).
3. Acknowledge – Explain that you understand their request and will need some time to consider and see what is possible, and will get back to them.
4. Consider – Review the employee’s performance, crunch the numbers and consider potential alternatives. Now that you know where you stand start preparing a response or counteroffer
5. The next step depends on the outcome of step 4:

a. Accept – full steam ahead, approve the request!

b. Deny or Counteroffer – read on below

Here are some tips for denying or countering offering a pay rise request in a way that still maintains a positive relationship with your employee:

• Be transparent about the company's financial situation. Explain that while you appreciate the hard work and dedication of your employees, the company simply cannot afford to grant pay rises at this time. Or if there is another reason the request cannot be granted, such as performance issues, now is your opportunity to address these.
• Offer alternative forms of recognition and reward. This could include extra time off, professional development opportunities, or even a bonus.
• Be open to negotiating other aspects of the job. For example, you may be able to offer flexible working hours or a more challenging role.
• Provide a clear timeline for when the company will be in a better financial position to consider pay rises.
• Finally, be supportive and encouraging. Let your employee know that you value their contributions and that you're looking forward to their continued growth and success within the company.

Denying a pay rise request can be a difficult conversation, but it's important to approach it with empathy and understanding. By being transparent, offering alternative forms of recognition, and providing a clear timeline, you can maintain a positive relationship with your employee while also addressing the company's financial constraints.

Article by Bianca Brattoli

If you need any advice and need help, please reach out at hello@hrdynamics.com.au or 1800 877 747

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