How to know when an employee has earned a pay raise

Depending on the company policies around salary increases, the manager or supervisor usually determines when a pay raise is earned. Some reasons for an increase may be when an employee:

• displays strong leadership skills
• generates an increase in company revenue
• fosters ongoing relationships with clients
• supports their coworkers
• shows dedication to the company and its position
• accepts an increase in their workload

Related: Minimum Wage Raise: Benefits, Challenges, and Tips

Why is communicating a pay raise important?

Communicating a pay increase to employees can help you show gratitude and support for their dedication and hard work. Pay raises can also improve employee morale and can be a positive reflection of the progress your company makes. Offering pay raises can also indicate the company’s financial success. When communicating a pay increase to employees, it can be beneficial to have an open discussion during which you explain their value to the company and the reason for their specific salary or hourly rate.

How to initiate a discussion about pay

While most employees will likely welcome a pay increase, you can take a few steps to ensure your discussion is professional and respectful of other employees who might not receive one. Consider keeping any discussion of a salary increase private and confidential. You can also invite a representative from your accounting or human resources departments to attend the discussion to ensure that the proposed salary is financially viable and that you follow all applicable regulations.

Who communicates pay raises?

A company’s payroll protocol usually determines who is responsible for discussing pay raises with employees. For example, some companies might designate this responsibility to the manager who directly oversees the employee receiving a raise, while others might delegate the task to the human resources (HR) department. Involving members of your HR and accounting departments can help you communicate about salaries with employees and answer any potential questions about payments, as these departments typically spend the most time on payroll.

Factors to consider when communicating a pay raise

Maintaining an open dialogue with your employees regarding their salaries can help increase communication and boost morale. To keep an open dialogue, you can encourage discussion about raises and tell employees why you want to give them a raise when the time comes by identifying factors of their performance that qualify them for an increase. Here are some factors you might talk about when discussing a pay raise with an employee:

• A noticeable increase in an employee‘s productivity
• A specific exhibition of value, such as completing a high-level project or running important meetings
• A trend in an employee working with higher status clients who provide your business with more significant income
• The willingness of an employee to take on extra work
• The growth of the business leading to an increase in profitability

Related: If Your Employees Are Happy, They’ll Likely Stay, and Here’s Why

When should you give a pay raise?

Many companies establish criteria for deciding when to offer a pay raise to their employees, so you may want to consider introducing one at your company. This strategy can help make the process of raising pay transparent, letting employees know when they might expect to receive a raise. You can include these planned pay increases in an employee’s employment contract. You can also discuss salaries more easily during evaluations and performance reviews. In these cases, you can consider offering pay raises to employees who consistently perform well in their work and contribute to the growth of the business.

Related: What Is Competitive Pay? (Definition and FAQs)

Tips for communicating pay raises

Here are some tips you can use when announcing a pay raise:

• Explain the reasons: Share your thoughts on why the employee is receiving a pay raise.
• Express your gratitude: Thank the employee for their contributions to your business.
• Ensure you inform all relevant departments: Let payroll, HR and other relevant departments know about the raise.
• Use numbers: When discussing pay raises, use numbers rather than percentages to maintain transparency.
• Have regular conversations: Discuss performance and salary with employees annually or semi-annually to help retain and prevent them from looking for a new job. Ask about their satisfaction with their work and what their expectations are.

Related: Pay Transparency is Key to helping end Pay Gap in Canada

Employees who receive regular pay increases are likely to remain at a company longer and work harder for their employer. Ongoing communication and annual performance reviews foster an environment of cooperation and mutual respect between employees and their managers.

Related: How to Navigate Pay Transparency Regulations

Frequently Asked Questions

Here are some additional thoughts on how to communicate a pay increase with an employee:

What questions can you ask an employee who requests a raise?

If an employee asks for a pay raise, take the request seriously. To understand their expectations, you can ask them:

• How much of a raise are you seeking?
• What prompted you to request a pay raise?
• How do you feel about your performance this year?

Once you have discussed the employee’s request, let them know you will get back to them and avoid making promises about future pay increases.

How much of an increase do you give an employee?

To determine how much of an increase to give an employee, start by consulting a salary guide for the position title in the province or territory of the business. Compare the employee’s current salary or hourly wage to the range and consider what amount your company typically gives as an increase. 

Related: What is The Living Wage in Canada

What factors impact salary increases?

Providing a pay raise can seem like a costly activity that cuts into a company’s overhead. On the contrary, a regular pay raise is an excellent opportunity for positive discussions about your company and the employee’s contributions. When determining the amount of increase to give an employee, here are some factors to consider:

• Competitor company pay ranges
• Employee performance, reliability and longevity within the company
• Cost of living increase
• Company revenue and growth

How do you justify an employee pay raise to your company?

While you may feel your employee deserves a raise, you may also need to justify this position to the company owner or decision-maker. Before you do, consider these steps:

• Research industry standards and ensure that what you request for the employee falls within a range of their job description
• Highlight their achievements and contributions to show why they qualify for a pay increase
• Show their path for professional growth and how a pay raise can move them towards more responsibility within the company

Related: Should Employers Raise Wages and Offer More Incentives?