Pay me or else… What to do when employees request a pay rise?

With the cost of living rising so sharply in the last few months, many employees are looking for a pay increase. For employers though this can mean more than just a rise in the cost of the payroll, it could be a sign of a bigger problem in the workplace.

Why are so many employees asking for a pay rise at the moment?

The short, but not entirely accurate answer, is the cost-of-living increase. However, the workplace can be a complex thing and there may be more to it than just a need for money. In fact, it could well be that the money is just a red flag for some bigger issues.

Before we move on though, let’s recognise the impact of the recent soaring inflation. For many employees just keeping the power on and paying the mortgage could have become a concern. This is a real problem for many people and it’s not unreasonable for them to look to more income to cover the increase. To put context to that, according to a report in The Guardian in May this year, and average 2 children household could be looking at an increase of around £400 a month. That is a lot for anyone, but it is a huge amount for those on a low or sporadic income.

Clearly then, sympathy and understanding are going to be needed, particularly with those who will be affected the most. Sadly, empathy is one thing, and the harsh realities of business are often another.

Practical considerations

As always, it is best to ensure that you are looking at pay requests in a balanced and practical way. Some things you do need to consider:

• Can the business afford the increased hit on payroll costs?

• Is there a contractual element to think about? For example. Annual reviews, bonus payments and similar?

• Could you introduce new ways to reward employee performance going forward rather than just look at a blanket rise?

• What is the current market rate for the job, are you actually under paying? 

In addition to the above there may be other factors such as the continued viability of some roles, local conditions, expected business changes and so forth. The important thing is to not allow your natural empathy to trigger a yes/no knee jerk reaction.

What if the employee has another offer?

Since the pandemic prompted what the newspapers loved to call the great resignation and with the current low unemployment situation, it isn’t uncommon for a pay rise to be accompanied by the threat of leaving for another offer. This puts the employer in difficult position. Statistically speaking, the employee is very likely to leave within a short time of accepting a counteroffer from their current employer. Potentially worse for the workplace is that often they can leave a substratum of resentment in the employer/employee relationship. That said, the current employment market is not exactly employee friendly and losing a key member of the team may present some real problems right now. Using the threat of leaving for another job with better salary could also be a warning about a lack of loyalty, possibly caused by a culture problem or an employee/management relationship issue. If you do decide to go the counteroffer route to retain the employee, it is vital that you fully address the reasons behind the decision to go with the ultimatum of ‘pay or I leave’. In our experience it is rare that these are purely financial unless there is a huge disparity between market value and current pay. Unless you fix the underlying issue your counteroffer could be a costly mistake.

A question to ask yourself – Could this be about engagement?

We need to be careful that in our desire to help and be understanding of the cost-of-living situation, we don’t miss other possibilities. Pay rise requests may be financial in nature but they are often also a sign of discontent in the workforce. While certainly the current climate may well make money a motivator that has more impact than in previous years, it is still rarely the end of the story.

People are complex and their motivations are multi-layered at times, so a request for more pay could be a red flag that there are engagement issues. If you have received multiple requests for salary raises it may be worth looking at your employee management processes.

Are the employees:

• Empowered within the workplace?

• Valued, listened to, and know where to go if they have a problem?

• Engaged with the values of the company?

• Treated consistently, evenly, and equally across the workforce?

• Recognised if they achieve and rewarded?

• Working inside a culture of blame?

• Working with an ‘us and them’ mentality when it comes to the management line?

• Part of their development in terms of advancement, job satisfaction and training?

Disengaged employees are far more likely to make salary a focus point and then use it convenient weapon to express their dissatisfaction. Engaged employees on the other hand value their loyalty to the business and its support of their wellbeing. They will become ambassadors for your employer brand outside the workplace and, sometimes just as importantly, within it. A negotiation about salary, or any other workplace issue, is far more likely to have a mutually successful outcome if everyone has the same goals and values.

There is an old saying about calmness being infectious and the same is true about engagement in the workplace. If you actively promote and support initiatives that increase the level of engagement in the workforce that will spread to create a supportive culture that will be invaluable in difficult times such as these. If you don’t you could find yourself in a downward spiral of negativity, low employee retention and a conflict based employee/management relationship.

Call us on 01604 763494 and let’s talk about how we can help.