7 reasons to give your staff a pay rise

Calum Grewar, Content Writer · 11 Sep

Good management is as much about knowing people as it is knowing business. So indications that you need to change something are not always found in number crunching. And as much as you may not want to admit it, increasing what you pay your staff is often a good thing to change.

It takes looking at your staff, your clients, and the environment you create to understand how to best progress with your team. Part of this process includes pay rises. It’s an inevitable part of the job, and while it's always hard convincing your CFO to spend more money, your staff will always be one of your greatest assets.

Communication is the word of the day. Not only do you need to know who wants what, but you also need an accurate picture of what all your employees are actually doing before any meaningful conversation about pay can take place. So here are seven reasons to pay your staff more.

1. Your employees need money

Here's a simple equation that might help you determine whether it's time: inflation + stagnant wages = a gap. If your employees are struggling to buy the basics, it will impact a number of areas of productivity and morale.

On a serious note, 85% of Brits suffer from some form of stress, and monetary and work-related stress are the top two culprits.

Therefore, anything you can do to reduce an employee’s stress will be appreciated personally and reflected professionally. One way of doing this is rewarding not only the smashing of expectations, but also loyalty, ambition, and consistency.

Employee pay rise

These traits are just as important in workers as buckling down and working for 10 hours straight (and certainly more healthy). So, knowing your employees and how they work will tell you how they might be rewarded, with pay rises always being an option.

2. Surpassing expectations

Your team is achieving and excelling all targets set: this is a good time for an across-the-board raise. It can be an inclusive way to recognise collective work, and goes a distance in promoting the ‘team’ aspect of work life and how important this is.

However, all-inclusive pay packages might leave some colleagues feeling under appreciated. If Joanne sees Micky getting the same raise as her when she knows how much of his work she has been covering, discontent is likely.

Alternatively, if you’d like to single out a few key team members, rewarding them financially can encourage those star performers to continue the good job they’ve been doing. It also reminds them that their employer values their hard work, which goes a long way in employee retention.

This must be done sensitively, however, as some teams do not function well if some employees feel they deserve to earn the same as others. Are you rewarding performance, team work, loyalty, experience, ambition? These should be considered consistently to avoid misgivings.

3. You are losing employees

If your team has mysteriously shrunk to half its size; if you find your employees are leaving left right and centre, it’s time to look at your terms of employment. Are you paying your team at least a competitive salary? Sometimes this isn’t even enough, with workplace values and benefits also determining a large part of employees job satisfaction.

However, few things persuade like cash money. You don’t, of course, have to be reactive. If you want to keep your best staff (this isn’t really a choice), you should be at least matching competitors’ salaries, so raises may be in order.

Interestingly, replacing an employee can often cost up to a fifth of their wages, meaning that a 3-5% increase in their wages emerges as the cheaper option. So not only does employee retention ensure (most of the time) a good relationship within the company but can also save you money even if raises are required to pin them down. Loyal employees who know the business and its values are also indispensable, as we’ll see.

Employee churn

4. Loyalty

If Shelly hasn’t, in her 17th year with your company, received a raise, it’s time. I hope you’d consider rewarding loyalty long before Shelly’s real-term wage hadn’t decreased to that of a guide dog’s. However, some people are stingier than you think. A good way to consistently reward loyalty is by incremental yearly pay increases. This may seem unnecessary, but high employee turnover can cost a business a small fortune.

It can also affect the day to day runnings of the office by complicating simple task management, damaging the company’s image and team’s dynamic. So although not all turnover is bad, if your turnover rate starts to surpass that of the industry average, start considering why. Pay increases may be part of the solution to keeping them loyal.

5. Certain team members show desire and ambition

Employees who need little motivation to improve and grow with your organisation are prime candidates for a raise. Determination and drive to be the best they can be is hugely valuable to employers, and pinning these ones down should be a priority for managers. Offering more compensation for their efforts is a good way to recognise their positive attitude.

It lets them know that their determination is appreciated and valued within their business. A happy (well compensated) and determined employee who is locked down for years to come is an enormous asset to any business.

If, during your weekly checks, you discover that other organisations are paying a lot more than you to their employees of similar positions, then it could time to fork out a bit more. This is the proactive form of this list's number three. Resentment is certain if an employee learns that you’ve been underpaying them compared to a number of peers from other organisations.

high performer pay rise

Furthermore, if they decide to leave and you make them a last ditch offer, they’ll know that, essentially you’ve been undercutting them. Pay them what they are worth when you can. This way, the employee is happy, you are happy because they are happy, and then the employee is happy because you are happy that they are happy so everyone ends up happy. Lovely.

6. They have asked for it

Nobody likes to discuss money, let alone ask for money, let alone approach your senior and try to convince them that you deserve more. So, while this doesn’t mean you have to give them more money, it's usually indicative of some of the feelings mentioned above. If an employee has their eyes set on more glittery employers, perhaps they have come to you first out of loyalty to see what you offer.

Or, if they have been applying themselves well at work and feel that this should be rewarded, it’s probably time for an appraisal, after which payment discussions often follow. During this discussion, if the employee is well prepared and gives you a detailed description of their achievements and their plan for the future within your organisation, they’ve made your decision all the easier.

7. They add value to their position

This means that your employee has become so good at their job that they have essentially created another job within it, or their initial job is worth more to the company. If grand feats like this have been accomplished, then financial reward is a possibility. You’ll all have that one employee who has taken on extra responsibilities, or simply does their job so well that they’ve directly improved the business.

If that person springs to mind now, and they haven’t yet received any formal recognition about their work, tomorrow morning could be a good time to call them into your office for a wee chat. Employees who show initiative and innovation are invaluable to managers. They make the manager's job easier and act as catalysts for success within the team. You need these people.

Pay rise

Discussions regarding finance are never easy. Perhaps the main takeaway from this list is that being proactive is better when increasing an employee’s wage. You don’t want an employee to be so dissatisfied with their payment package that they look for other jobs, or feel that they simply must talk to you.

If employees know they will be readily rewarded for loyalty, hard work, innovation, determination etc., I wouldn’t be surprised if you started seeing these traits more and more in your workplace.

Also, with employee stress and turnover costing the UK economy billions each year, not to mention the costs they incur on small businesses, communication between employer and staff is essential. This will help you ascertain who may be in need of a pick-me-up, who is deserving of one, and what each individual adds to your business.

This is all part of good management, and consistent and fair pay increases are a large part of this. What’s more, they could even save your business money.

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