How to handle pay rises in a cost-of-living crisis (5 tips)

With pay rises falling behind the cost of living, you may want to increase your employees’ pay to match price rises—and your employees almost certainly want you to. But after two years of pandemic havoc, what if you simply don’t have the budget? How do you deal with that conversation then?

1.    Do your research

Research the salary benchmarks and benefits packages available in your industry, so that when employees start asking, you’re prepared. Be aware that they’ll be looking up this information too.

You may have seen headlines about people moving to ridiculously highly paid roles, but find out whether that’s really happening in your sector. Don’t risk paying two or three times the industry average if your employee wouldn’t be getting that elsewhere.

2.    How to approach the conversation

Remember, if your employee is asking for a raise, they’re probably nervous—and they’re asking because they want to stay with you. This is a great time to work on your employee retention. Take their request seriously, listen with an open mind, and do some research before you say no.

Arrange a follow-up meeting to give them your decision and reasoning after you’ve thought about it. This is a good opportunity to talk to your employee about setting quantifiable goals that you can review at an agreed date in the future, but make sure you don’t over-promise.

If your employee threatens to leave if you don’t offer more money, again, avoid replying straight away. Take some time to think it over. What do they contribute to the organisation? How much has their salary changed over time? How does it compare to salaries for similar roles in the company or elsewhere?

3.    Remember it’s not just about money

If the pandemic has left you unable to afford pay rises across the board, think about other ways to attract and retain staff, such as opportunities for progression, a focus on wellbeing, and a strong company culture.

It’s also worth realising that some employees may be happy with a one-off payment rather than a raise, especially if they are struggling with living costs. Be kind and compassionate, especially when you need to say no to someone. Don’t let them leave the meeting thinking you don’t care.

4.    Look at your benefits package

Benefits are just as important as salary, or even more so, in today’s climate. The kind of benefits that will retain staff post-pandemic go far beyond office perks. Think extra time off, hybrid working, flexible hours or a four-day work week.

Team building days and social events are also worth building into your benefits package to foster strong relationships and reduce stress and burnout.

5.    Be transparent and encourage feedback

It’s important to be open and honest with your people and make them feel safe to approach your or their line manager about difficult subjects like pay, benefits, and job satisfaction (or lack thereof).

Try asking people directly what they want through engagement surveys, which are a tried-and-tested way to find out how people feel about working for you and what issues need addressing. You can also ask line managers to bring up pay in 1:1s, but make sure they have the skills they need to handle those conversations first.

When handling salary requests, preparation is key. Set up regular performance reviews and create a progression plan with your employees. Managers should be assessing each staff member’s performance on an ongoing basis, and almost nothing is as motivating as a raise or promotion.

Having said that, not everyone will feel confident enough to ask for a raise directly–-so keep your ears open for hints.