Management Matters

How to Say “No” to an Employee Asking for a Raise

Date Posted: 11/12/2013

Most employees have a difficult time asking their bosses for a pay rise. So when they do ask for one, you need to be careful how you handle the situation especially when you have to say “no”.

A good hard working employee can react to a “NO” negatively, thinking that his or her work performance is not appreciated and therefore doesn’t deserve a raise.  How you say “no”, however, can make all the difference in whether an employee stays motivated or ends up looking for another job. Compensation issues are taken very personally by workers, so tread carefully.

Here are some ways that you can use to make saying “no” a little easier for the employee to understand and accept.

1.    LISTEN:  Let the person do the talking. Employees usually mention a number of reasons why they need or want a pay rise.  The usual reasons are that their personal expenses have increased; that they believe they deserve more money; that they think they are underpaid compared to others either in your company or at other similar companies; that newly added responsibilities warrant an increase.  By listening carefully and asking questions, you may even discover that salary isn’t really the issue.

2.    EVALUATE:  Now it’s time to assess if all the reasons raised are valid and determine if the employee really deserves a raise or not.  Each position in your company has a certain value, as determined by the marketplace.   An employee’s personal finances aren’t relevant nor is the employee’s performance, if the ceiling value of the person’s job responsibilities has been maximized.

3.    EXPLAIN:  If you have to say “no”, then you need to explain the reason for your decision and give all the reasons why you’re saying no “for just now” and empathize with the person.  If you have a budget constraint, be frank.  But offer that you will be able to give the person an increase in the coming budget year.  Sell the power of your brand which, with their help and good work will allow them to earn much more in the future as the company increases its profits.  If you can’t give a raise maybe you can offer something else which can still make the employee feel appreciated, such as additional vacation days, giving an allowance or a bonus at the end of the year.

Remember that other employees gossip and if they see that you automatically grant increases whenever they are asked for, you will soon be in danger of setting a dangerous example.

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