When to give a raise
Every employee will expect a raise at some point. And if you want to get the best out of your staff, a well-timed raise can help. But how do you decide how much to give them – and when?
Renumeration is a big part of job satisfaction. So if you're going to hold onto your best staff, you'll need to pay them what they're worth. It's not enough to give the right starting salary and keep up with inflation. You’ll be expected to reward them for improved performance and skills. The average raise is around 3% but it varies across industries and professions. Consider it a good starting point. You can decide whether individual employees deserve more or less.
Replacing an employee can cost you as much as 20 percent of their annual salary. Besides helping you retain staff, employee raises will also give you a spike in productivity as morale goes up.
Your employees will expect – and often deserve – a raise every so often. You'll need to think about it carefully:
- When’s the best time to give a raise?
- How much should you award?
- Does each employee deserve the same amount?
- Is a raise the best way to reward good work?
These questions can only be answered by understanding how valuable each employee is to your business.
Give a raise to retain your best staff
People leave their jobs for all sorts of reasons, and pay is a big one. Besides helping your employees meet their living expenses, pay is tied to other measures of job satisfaction. If they’re getting paid right, employees feel:
- they’re recognised for good performance
- their job is important and valued by the business
- they’re keeping pace with their colleagues
So if you're going to hold onto your best staff, you'll need to pay them what they're worth. It's not enough to give the right starting salary and keep up with inflation. You’ll be expected to reward them for improved performance and skills.
If you don't, they may start looking for another job, which can get expensive for you. Deciding when and how to give a raise involves a combination of soft skills and hard data. We'll look at the data first.
Crunch the numbers
Modern business software can tell you a lot about the value you get from employees. You can use the information to help decide when a raise is due.
- Point-of-sale systems will tell you who’s working when you’re busiest.
- CRM (Customer Relationship Management) will show who's generating leads, closing deals or growing accounts.
Payroll software will reveal what
you’re paying employees, and when they last had a raise.
- Performance dashboards will tell you which parts of the business are driving profit.
It pays to set key performance indicators (KPIs) for each staff member. Work out what you need from them to make the business successful. Then discuss those KPIs with each employee so they know what’s required of them.
Be aware, however, that these sorts of hard numbers can only tell you so much. You’ll also need to try and understand how your employees are feeling.
Look after your introverts
Good managers talk to their employees. Great managers listen to their employees, and act on what they hear.
Informal meetings with staff can help you identify who feels good about their work and who doesn't. Dissatisfaction won't always be related to pay, but when it is you can potentially resolve it.
The squeaky wheel gets the oil, and employees who ask for raises may be more likely to receive them. But if you want to be fair, you need to also consider your quieter employees. Think about staff who do their job with little fuss or noise. Introverts regularly get paid less than extroverts, yet they can be just as deserving of a raise. They just won't shout about it.
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