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How To Deal With A Small Business Employee’s Request For A Pay Rise

As your small business grows and you expand, taking on more employees and seeing increased revenue, there’ll come a time when you get asked the question no small business owner likes to hear:

“Can we talk about a pay rise?”

The reason it’s not liked to be heard isn’t generally because it means you’re going to have to pay out more money each month, but it’s because the whole situation is a difficult one to deal with.

That is, if you don’t know how to handle the situation in the best way possible.

Is it justifiable?

The very first thing you have to do is determine whether a pay increase is justifiable.

For example, has the employee been working at a particularly low rate for many months, in an effort to help the small business grow?

Have they been going above and beyond what’s expected of them? Have they received outstanding feedback from customers or are you yourself beginning to realise you aren’t utilising their knowledge and experience as best as you possibly could?

For many, the answers are obvious and it’s clear that a pay rise is justifiable and you can begin to look at the technicalities behind a rise.

However, if it’s not, it doesn’t mean you shouldn’t consider it, it just means you have to look at how you could justify the rise.

For instance, could you add more responsibility to the person’s job role? If you could free some of your own time up by offloading some of the work to them, it could allow you to focus your attention elsewhere more – and if you could do this, it may mean you don’t have to pay out for a new sales person, administrator, etc.

Of course, giving the employee more responsibility and therefore more work will mean more of their time is taken up, but it’s important you understand that most of us could actually do more at work.

This isn’t to say people are lazy, but as time passes, we become more efficient at the work we do. A process that may have taken us one hour previously may now only take 45 minutes – and if you’ve got four daily processes you’ve shaved 15 minutes off, that’s one hour extra you’ve got ‘free’ everyday.


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Can you afford it?

Once you’ve made a decision as to whether the rise is justifiable or not, you then need to think about the most important thing – can the business actually afford it?

If you can, that’s fantastic! You’ll please the employee, likely get more from them and your business will continue to thrive – arguably more than ever.

But, it doesn’t matter how justifiable the rise is, if it’s going to put huge financial strain on your small business, it’s not going to be worth it.

However, that doesn’t mean you need to stop the process right there, as many small businesses can often offer a solution that’s just as attractive as a pay rise, at least on a temporary basis.

For instance, if you can’t offer more money, could you offer reduced working hours for the same salary the employee’s currently on? The pay rise is obviously going to be the more favourable option, but if you could survive without the person for an afternoon, giving the person Friday afternoon off fully-paid could be a very attractive alternative for them.

And whilst it’s more of a drastic option, some small business owners offer stock options to their longest serving, loyalest employees – they may not mean much at first, but we’ve all heard the stories about the people who received Facebook shares in the company’s early days, only to become multi-millionaires when Facebook floated on the stock market.

And if you simply can’t offer any alternatives, you just have to be honest with the employee. Don’t dress things up, sugarcoat them or try to lie. Be honest, tell them the whole truth and although they may not be happy, they’ll respect you for it.

As a point to note, if you are unsure whether the business can afford the rise, what’s important to remember is that you should never stretch yourself as a business too much, as it could result in disaster – and at the end of the day, the employee would like any job, rather than no job.

As a small business owner with several employees, it’s inevitable you’re going to be asked about pay rises at some point. Awkward, difficult and complicated for some, it really doesn’t have to be, as long as you know exactly how to handle the whole situation.

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