How to Keep Staff When There’s No Money for a Pay Rise

By Amanda Beattie
11 Jan 2019

Your best employees work hard because they’re passionate about what they do. But even they still probably want more money…

Unfortunately, not everyone can get a big pay rise each year. No business can work like that.

Which puts you in a tricky position. If you can’t give your staff the raise they deserve, what’s stopping them from leaving to work for someone else, like a competitor? Underpaying is a huge retention risk for businesses—according to one survey, 22% of employees who left their jobs did so for more money.

Fortunately, pay isn’t the only way to reward. Here’s how to keep your best employees, even when there’s no money for a raise (and what to do when pay really is the only thing that matters)...

First, understand what your employees really want

Career development? Opportunity? Recognition? These are common reasons for asking for a pay rise.

But pay won’t get someone closer to a promotion. The buzz from a raise will soon wear off. And more money won’t automatically lead to a better work-life balance.

Listen to your employees and find out what they want. Discuss their ambitions in an appraisal, or even just over a coffee. You’ll probably find that a pay rise alone won’t make them happy...

Career development: money can’t buy it

Remember when we said that 22% of employees leave for better pay? Well, that was only the second-most common reason for leaving a job. A whopping 32% said they left for better career opportunities.

Which isn’t surprising. Development, experience, and training give long-term value to your employees. Your most ambitious workers will already know the skills or qualifications they need. Pay for them to take a course that will boost their career. Or if it’s softer skills they’re after, offer in-house training. It can bring big savings compared to a pay rise.

Any training should be relevant to your employee’s career ambitions and your business needs. Even internal training or work shadowing has a time cost, so make sure you get something back from your investment.

Opportunity: what do your staff want from life?

According to another survey from YouGov, 21% of UK employees aged 25 to 34 are unhappy with their work-life balance. Offering flexible or home working can give staff more control over their time. And if it cuts down the cost of their commute, they’ll have more disposable income, too.  

Any employee who has worked for you for at least 26 weeks has a legal right to request flexible start and finish times or to work from home. But not all businesses are able to offer it.

Flexi-time or home working also comes with HR and health & safety challenges. And if you allow home working for some but not for others, you need to have a solid reason. Otherwise, you risk discrimination charges. 

So think hard about whether flexibility is workable before you commit. You’ll face awkward conversations with your employee if your new arrangements don’t work out…   

Recognition: a personal thank you is worth more than it seems

Could a simple “thank you” and some positive feedback save you a costly pay rise? Possibly. 

One Gallup survey found that 40% of employees who didn’t receive positive feedback felt disengaged at work. Of those that did receive positive feedback, only 1% felt disengaged.

Research also shows that engaged employees are more productive and less likely to look for a new job.

Managers should give regular feedback and praise to their staff. But for an outstanding employee, a handwritten letter from senior leadership can be the recognition they’re looking for.  

Remember, as inspiring as your chief executive is, it’s not just the kudos that are valuable. Written praise is an asset for your employee if a promotion opens up. Use them sparingly.

Okay, sometimes it’s just about money…

If money is all that matters, think about setting performance-based targets before giving a pay rise.

This is easier to do for some jobs than others. You can tell if your salespeople hit their targets based on how much work they win. For staff in IT or finance, maybe it’s efficiency savings or taking on new responsibilities. Ask yourself, what value does your employee bring, and how can they do more to help your business grow?

In an ideal world, you set targets and your employee smashes them. They bring greater value to your business and you reward them for it.

But be careful. Don’t promise a performance-based pay rise unless you can measure performance. And don’t commit to a pay rise unless you can deliver it. Even breaking a verbal promise to give more money can land you in an employment tribunal.

Talking about pay is hard

No one wants to tell a valued employee that you can’t justify a pay rise. Or lose a talented up-and-comer who asks for more money, but really wants more responsibility. Or have your best manager look for a new job when she’s just exhausted from her two-hour commute. 

Setting pay and rewarding employees is hard, but it’s important to get right. It keeps your staff motivated, and your business on the right side of the law. That’s where we can help.  

For 40 years, Croner has been the industry leader in pay and reward services. We find the best way for you to reward great performance—without breaking the bank.

Our consultants assess the reward options available and the impact they’ll have on your business. We set pay grades that link employee wages to skill sets and responsibilities so your staff knows how you reward exceptional performance.    

We can also create an appraisal process for your business to better understand what your employees want. And we’ll be at your side 24/7 to help you tackle the most difficult conversations about employment…

Get FREE advice from a pay and reward expert. Call Croner today on 01455 858 132.

About the Author

Amanda Beattie

Amanda represents corporate clients and large public bodies, including complex discrimination and whistleblowing claims. Amanda also drafts and delivers bespoke training regarding all aspects of employment law, including ‘mock tribunal’ events; in addition she also frequently drafts employment law articles for various publications for Croner and their clients.