How to Handle a Pay Rise Request

From time to time, employees may want to discuss a pay rise with you. This could be related to gaining new responsibilities or skills - which goes beyond their current duties and salary.

As an employer, you must manage all pay rise requests appropriately. This includes being fair on deciding whether to accept or decline their request.

Failing this could ruin employee motivation, morale, and loyalty. And leave you with job resignations, reputational damage, and company losses.

In this guide, we'll look at what a pay rise is, when employees can request them, and how to manage them correctly.

What is a pay rise request?

A pay rise request is used when an employee expresses a wish to increase their current salary. They may ask for a pay rise through a written request or present a verbal business case.

Most employees will usually ask for a salary increase whilst working in the same job for a certain period. But the final decision on whether to accept or decline them falls on the employer.

Some employees can be very vocal about wanting a higher salary. Or they could lack confidence in asking for one (even if they deserve it). Either way, every employer should have a process which deals with pay rise requests fairly.

When can employees ask for a pay rise?

There's no set time on asking for a pay rise. It's common to request them between six to twelve months into a job - no more than once a year.

However, certain periods are seen as a natural time to make pay rise requests. Let's look at some key points where employees may ask for a pay rise:

Promotions

It's very common for employees to receive a higher salary after being promoted. This is because promotions usually come with more responsibility, work, and expectations.

Employers may even offer more money due to the actions of their competitors. Offering a higher going-rate may dissuade employees from accepting a job offer at a rival company.

Recent pay reviews

Within their first few years, some employees are able to work beyond their job description or duties. Maybe they've bought in new clients, managed new projects well, or reached certain job milestones.

Employers can reward their efforts with higher wages based on their last pay review. This is often done instead of giving a promotion, so it doesn't ruin employee motivation or morale.

Annual performance reviews

Once an employee has completed one year's continuous service, they might be invited to an annual performance review meeting. Here, employers will discuss the employee's own work; like successes or challenges they've faced during their job.

Employers don't always offer a salary increase during this time. Although, increasing their current pay may convince them to keep working for you.

Start of the financial year

Sometimes, employers may discover that they have a bigger budget than they'd realised. This is often found during the start of the financial year.

Employers may give a pay increase to employees who have been recently outperforming or remained loyal to the company for some time.

What is the law on pay rise requests?

Most workers think it's their legal right to get a pay rise for every year of continuous service. But this is actually false.

There is no law on giving a pay rise or even accepting requests (unless this is a contractual right). As an employer, it's up to you whether to accept or decline such requests.

Whilst it's not a legal right, there are consequences you'll need to consider. Employees may feel undervalued or unmotivated to work at your company. Some may seek employment elsewhere, especially if they're offered better money and job entitlements.

What is the average salary in the UK?

According to the Office for National Statistics (ONS), the average salary range in the UK is £32,300 (as of 2022). This works out at £638 per week for full-time employees.

Of course, these numbers vary depending on a variety of factors. For example, age, industry, local area, and many other things.

Whilst employers aren't legally obligated to accept pay rise requests, you must ensure all workers are paid fairly. You cannot pay workers less than the National Minimum Wage (NMW). These offences are punishable by fines of up to £20,000 per worker.

Do you need to include pay rises in gender pay gap reports?

Yes, employers must include all pay rises given within their annual gender pay gap reports. (Reporting is only a legal duty for certain companies who meet the requirements).

Gender pay gap looks at how salary compares between female and male employees within a company. But the reports don't only look at salaries; they also include commission, bonuses, and other work-related pay.

It's important to ensure you don't decline pay rise requests based on an employee's sex. This may classify as sex discrimination which can be upheld at an employment tribunal (ET).

How to manage pay rise requests from your employees

Most managers will usually handle pay rise requests the same way. But, you should never be rigid in your approach.

Take every request for a salary increase on its own merit. Look at the bigger picture as to why an employee is asking for a pay rise. From here, you'll be able to reach a fair decision on whether to accept or decline their request for higher wages.

Let's look at the main points on managing pay rise requests from your employees:

Create a procedure for pay rise requests

The first step employers should take involves creating a procedure for pay rise requests.

It can feel daunting for employees to ask for a pay rise. So, design a new process that's accessible for them; and include all the information they need. You can even outline them within employment contracts, company handbooks, and relevant pay policies.

It's also best for employees to express their requests in writing, like a letter or email. This can stand as concrete evidence, which may be used if faced with a potential employment tribunal claim.

Consider their written request fairly

Employees should provide a written request that highlights their reasons for wanting a pay rise. They should include answers to questions like:

• What are your reasons for wanting a pay rise?
• Can you provide evidence to support your reasons? (Like new accomplishments or qualifications that they've brought to their current role).
• How much are you requesting as a pay rise?
• Would you like to discuss the matter further in-person?

Pay rise requests shouldn't mention things like how long they've worked for the company; or salary comparisons with other employees. It's also best not to react to threats of quitting when declining their request.

Encourage open talks about salary increase

It's important for employers to encourage open talks when it comes to a salary increase.

Employees should feel confident to talk about how they can grow their current salary range. This kind of additional support will help encourage morale, loyalty, and motivation towards your company's success.

Invite them to a private meeting to discuss their request in full. You can even invite an HR department representative who can outline employee rights or company procedures.

Allow the employee to share their reasons for wanting a pay increase. Even if you don't agree, stay calm and keep professional throughout the meetings.

Look at their recent performance review

Employees shouldn't just get a pay rise just for accruing service years. It should be based on their recent achievements, performance, and merits.

For example, maybe they had an integral part of a successful project; or they've presented an important skill that's helped grow the company's success.

When considering pay rise requests, look at their recent performance review. This is a great indicator to use when deciding to accept their request. It can also help with reaching a reasonable number to set their pay increase at.

Avoid underpaying employees

Every employer has a legal duty to ensure all staff-members are paid fair and legal salaries. Some employees may ask for a pay rise because they're being paid less than the National Minimum Wage (NMW).

It's illegal to pay workers less than the legal amount. This right doesn't just apply to full-time staff; it also includes part-time, agency, and zero-hours contract workers. You also need to consider those on leave (like maternity, paternity, or parental leave).

Use a salary checker to ensure employees are paid the legal amounts first. After this, you’ll be able to discuss pay rise requests efficiently. This should be applicable to both current and new employees within the company.

Consider alternatives to giving more money

It's not always feasible to offer a pay rise, especially if your company budget can't afford to offer more money. There are other alternatives to consider instead of giving out money. For example:

• Role changes: Like staff training, new responsibilities, or better work-life balance.
• Company benefits: Like bonuses, pension contributions, healthcare, travel allowances, or even a company car.

If you can't afford to give them a pay rise, make it clear to the employee raising the request. Be fair and honest about the company's situation. Highlight that their request hasn't been rejected completely; you may delay it or reconsider it at a more suitable time.

Can you decline pay rise requests?

Yes, an employer is legally allowed to decline pay rise requests. This isn't an easy conversation to have; nevertheless, it's an important one to have with employees.

Be aware, they could be expecting a positive response and may be disappointed with what they hear. So, express the reasons behind your decision; and discuss how you can help them secure a pay rise in the future.

Employers may decline pay rise requests for a number of reasons. For example:

Financial issues

You may decline their request because you simply cannot afford to give a pay rise at the current time. For example, you could be going through a stressful, busy time trying to keep the company open during a financial crisis.

Match market value

You may be asked for a pay rise because an employee has discovered that their job-title has a higher market rate. However, it's not your legal duty to match salary trends. For example, you refuse to give an employee a higher pay-level just to match the market value at a rival company.

Needs further development

You may not be convinced that the employee in question deserves a pay rise. Maybe they suffer from a skills shortage, or they've yet to impress you over the past year. For example, you decline their request because you believe they work below the industry-average.

Can employees ask for a pay rise at any time?

Yes, there are no laws or legal restrictions on when employees can ask for a pay rise. It's common to request them between six to twelve months into a job - no more than once a year.

However, employees may request a pay rise due to ongoing or altered circumstances relating to their job. For example, maybe they've brought in the most new clients; or their annual performance review is due soon.

Can you negotiate a pay rise?

Yes, an employer can negotiate a pay rise. Remember, you've only agreed to a pay rise; it doesn't mean you've accepted the amount the employee is asking for.

It's best to negotiate this and express what you can offer - this is known as a counter-offer. Be fair and base the new figure on the employee's achievements and successes. You can even decide on an estimated amount based on what other professionals are paid in similar roles.

Can you accept pay rise requests verbally?

There is no legal rule on how to accept pay rise requests. You can do it verbally or through written means.

However, verbal acceptances can be problematic for employers. If you have nothing documented, it's hard to back up your decisions. And this can lead to employees losing trust in you - resulting in decreased morale, motivation, and loyalty.

Can you dismiss an employee who requests a pay rise?

No. Employers should not dismiss an employee who requests a pay rise.

If you dismiss them, this can automatically be deemed as unfair by employment tribunals. This legal right stands regardless of how new they are to their job role. If the claim is successful, you could be forced to rehire them, pay lost wages, and face company penalties.

Get expert advice on pay rise requests with Peninsula

From time-to-time your employees may ask for a pay rise. This could be down to gaining new responsibilities; or even being paid less than the legal minimum amount.

As an employer, you need to manage pay rise requests correctly. This includes being honest with your employees if you're unable to provide them with the answer they want to hear. It's best to consider their reasons and aim to reach mutual grounds.

Peninsula offers expert advice on pay rise requests. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 029 4377 and book a free consultation with one of our HR consultants.