Salary negotiation can be a problematic part of employing staff, especially if you’re the owner of a small business with a modestly-sized workforce. A small, close-knit team often means that relationships between junior members of staff and those who hold the purse strings can become much closer (and subsequently more casual) than those in large companies.

While this is great for collaboration and communication, it can cause issues when it comes to pay rise requests.

An increase in salary is something that should be taken very seriously by both parties in order to keep both personal and professional relationships harmonious. If a member of staff feels they are being underpaid for the work they carry out then they have the right to request a revision of their salary.

By the same token, employers are also within their rights to call this request into question if they do not believe it is justified.

As you can see, there are plenty of grey areas you’ll have to deal with when it comes to salary negotiation so we’ve put together some simple advice on how to handle pay rise requests.

Consult your accountant

When it comes to matters of money and crunching numbers, it’s best to consult your accountant first. They are best placed to advise whether an increase in salary is something you can or can’t afford with your current cash flow situation. If you don’t currently have an accountant or are looking to change, claim your free quote today to see how we can help.

Discuss non-monetary benefits

If you are in agreement that the employee is deserving of reward but haven’t got the budget to implement a salary increase then just be honest. Don’t veil this behind any other excuses. Just be transparent in discussing other non-monetary alternatives such as flexible hours, the chance to work from home during the week, training opportunities or new responsibilities.

Offer some positive alternatives if the answer is no

If you decide that a pay rise isn’t the appropriate course of action at this moment in time, inviting discussion about future plans is a great way to diffuse any heightened reactions due to disappointment and put a more optimistic spin on your decision. This might consist of setting targets which the employee needs to meet in order to achieve the desired salary increase by a certain period of time.

Don’t make any rash decisions!

Last but not least… make sure you allow yourself adequate thinking time before making any final decisions. Whichever verdict you’re leaning towards – whether it’s a ‘yes, of course’ or a ‘no way’ – be sure to sleep on it and discuss it with one of your peers so you don’t make any decisions you might later regret.

Salary negotiation and pay rise requests can become even trickier if you’re the owner of a family business with emotional investment in your employees. Click for our helpful advice on how to stay strict with finances when running a family business.

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About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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