What do I do when an employee tells me they are paid below market and they want a raise?

What do I do when an employee tells me they are paid below market and they want a raise?

What do I do when an employee tells me they are paid below market and they want a raise?

By Kate Reichert, HR Business Partner & Compensation Specialist, Trüpp.

It’s happened to all of us. Fatefully, an employee comes to us and shares that they’ve seen salary data online and demands their pay be at “market”. Often, these employees will threaten to quit if they don’t get that pay raise, or worse they become disgruntled and disengaged. So, how do you handle these situations and help coach your employees to understand?

Schedule a time to chat: It’s okay to allow employees to air some of their grievances. Employees want to be heard and understood (like any human being) so speak to them on a human to human level, rather than just manager to employee.

Check in on how other components of their job are going: Is there a cultural disconnect? Are they overwhelmed or feel like they are doing higher level work than their job description outlines? Get to the root of where this is coming from.

Explain your company’s compensation program (assuming you have one): Helping the employee understand your organization’s position to market, the salary databases you use and their reliability over more public data, and the organization’s pay philosophies are key. Without some level of transparency, compensation decisions seem secretive to employees, which can create fear, resentment, or disbelief in a structured and consistent process. Gain their trust by being transparent about the program.

Express a little tough love: It’ll likely be difficult to justify a pay increase, especially relative to others in similar roles. After all, if you give one person a pay raise simply because they asked for it, it would be inequitable to not give other employees a similar pay increase, and you can see the domino effect this can have. Setting a president here can get you into some very sticky situations so I recommend going forward with caution.

Consider the possibility the employee may be right: Be critical when considering this and don’t jump right to giving an employee a pay increase simply because you want to avoid an unpleasant conversation. Do consider, however, there may be some merit to the employee’s position. Do some research, or rather, have HR conduct a market study for the position and confirm the appropriate pay rate and compensation structure placement. It is also important to note that this exercise should not be completed independently of other positions. Other similar jobs in the organization should also be considered for the purposes of pay equity along with respect to the implications a change can have on other such roles.

Remember – you can’t make everybody happy all the time: Some employees won’t understand why you can’t give them a pay raise and that’s okay. You may even lose some employees in the process. But hopefully, what you are left with are the ones who do understand your company’s position on pay, take pride in the work they do, and appreciate the pay you do give them. The most important thing here is that your employees feel heard, and your programs and administration of compensation are compliant with the appropriate rules and regulations.