It’s one of the toughest jobs you face as a boss. Looking a hardworking employee in the eye and saying, “Sorry, you’re not getting a pay rise.”
But there is a way to say no to a pay rise that actually improves employee performance and morale. In fact, it works so well that your staff may never ask for a pay rise again…
4 steps to controlling pay rises
1) Create pay bands for every position in your business
A pay band is the salary range for a certain role in your company based on market analysis. For example, junior HR professionals in your business may have a pay band of £22,000 to £26,000.
Setting pay bands gives you leeway to hire staff with different levels of experience. You can pay a little more to attract an employee with a strong CV or a little less if they need training to reach the required level of competence.
Pay bands are a transparent and effective way of allowing your staff to understand what pay to expect while they work for you and how they might progress through the bands for exceptional performance (more on how to handle that later).
For example, if your junior HR professional is already at the top of the band, earning £26,000, then they can’t see any scope for progression within their current role. So they won’t ask for a raise. They’ll ask for a promotion. Which brings us on to Step 2...
2) Set capability levels that staff can progress through
Capability levels are grades for particular job types. They help you organise and manage a fair pay structure based on your employees’ skills and responsibilities.
Some companies keep capability levels simple and set junior, middle and senior grades for roles. Others create more elaborate systems. The civil service, for example, is thought to use around 11 grades to separate the most junior from most senior staff.
When you set pay bands for your capability levels, your staff will only expect a substantial pay rise if they move up a level.
But how do you stop staff from just asking for a promotion every year? Simple, you make them earn one instead.
3) Give workers measurable targets and objectives
You should have regular conversations with staff about what you expect from them and what they want to get from their careers.
Work with employees to set yearly objectives and goals during their appraisals. Then decide what the reward is for an employee who exceeds their objectives. This could be a pay rise within their pay band or a promotion to a higher capability level.
Setting objectives is easier to do for some jobs than others. For your sales people, you’ll probably base targets on how much new business they bring in. For staff in IT or finance, maybe it’s efficiency savings or taking on new responsibilities.
Whatever you choose, make sure objectives are measureable and sustianable and that they support your business goals.
4) Link pay increases to business performance
If all your staff meet their objectives, you’re more likely to end the year with a healthy balance sheet. But no one can predict the future. And you can do everything right, but still have a difficult year.
So make sure your staff know that all pay rises are subject to business performance and manage expectations by sharing updates with your teams on a regular basis.
If you follow these steps, your staff will already know if they’re likely to get a pay rise or not. They won’t need to ask for one and you won’t have to disappoint them.
What if I don’t want to give staff a pay rise at all?
Let’s face it, your first priority is for your staff to do the work you’ve given them for their contracted salary. There’s nothing wrong with that.
But you can’t ignore the fact that most of your workers want to move ahead in their careers. If you don’t give them the opportunity to do so, your staff will be unmotivated, they’ll be unproductive, and eventually they’ll leave.
A pay and reward system helps you get the best performance from your workers and achieve your business goals. Plus, by putting the responsibility on your staff to earn a pay rise, rather than just ask for one, you give employees more control over their destinies. So it’s a win-win.
Let’s get you started
Our experts support businesses across the UK to get the best from their staff. We give you industry-leading market analysis to set pay bands. We help you grade jobs into capability levels. And we support you to develop a watertight appraisal process.
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