How do you deal with someone who doesn’t earn a pay rise? It’s one of the few downsides of moving from mandated pay reviews to performance based-ones.
Setting up effective remuneration policies and plans will help you get part of the way there. But even with the clearest process in place, there will almost always be a few people who’ll be disappointed by what they receive.
By meeting with any unhappy staff and addressing their concerns directly, with tact and empathy, you can help minimise fallout.
1. Explain your reasoning
At the start of your meeting, explain the specific reasons behind your decision not to award a pay rise. If your decision was based on the employee’s relative position in the market or salary range, come prepared for a conversation about their current job and its value to your organisation and the marketplace, so the employee fully understands the wider context.
Most performance-based salary increases reflect that the employee is delivering additional value to a company. So if this employee is in the same job, doing the same work and using the same skills as they were this time last year, it's unlikely they've added anything new to your bottom line.
2. Address underperformance head on
Put simply, if underperformance is the reason an employee didn't receive a pay rise, it’s time for a broader conversation (assuming you're not already having it) - one about their future with the company and where they see their career heading.
Avoiding this discussion all but guarantees they’ll continue to fall below expectations, gives them little opportunity to improve, and could prove disastrous for morale more generally.
3. Focus on the future
Limiting salary increases will eventually affect staff retention, so it’s important to make sure employees hear good news too. So, if there’s an opportunity for another salary review in the future, include this in your discussion.
Similarly, if a move to a more responsible position is the easiest way for them to increase their salary, discuss what they need to do to position themselves for promotion, or to be able to add more value to the business. Focus on how they can do this over the coming year. Is there an opportunity to take on more responsibility? Can they improve their skills or output in some way? Help put a plan in place to get them there, including working out any additional training they might need.
4. Show your appreciation
You can always soften the impact of a zero salary increase by expressing your gratitude for a job well done. Talking about the specific areas where the employee excelled will help to restore their self-image as a valued member of the company. It’s also a good idea to mention the overall contribution of their department, as well as any particular talents the employee brings, including a positive attitude and dedication to getting the job done.
5. Avoid the traps
While a conversation about missing out on more money can be difficult, it’s vital you don’t derail the process by falling into these traps:
Above all, don’t walk into these conversations unprepared. Make sure you've got all the facts in front of you to minimise errors and lower the chance that the discussion will go awry.
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