The end of the year is creeping up on us and you sense employees are wondering: will I finally get that raise I was hoping for? Here are a few important things to keep in mind when answering that question. They may end up saving you money and trouble.
We all know work nowadays isn’t just about the paycheck. Especially millennials tend to value meaningful work over lots of dough. ‘Purpose’ is the key word here: making a difference, instead of focusing on money. (Unless they feel you are underpaying. Then they turn into real Gordon Gekko's.)
All the more reason for an employer to be mindful of the salaries you’re paying though. The monthly paycheck isn’t only about cold, hard cash. Getting paid right means that your employees feel valued. It shows them that their job matters to you, their boss. That their efforts don't go unnoticed. That someone cares.
A raise, especially one that is not asked for, can be a nice or even crucial gesture to your team members. But before considering a bump in salary , there are a few things worth taking into account.
What are you paying right now?
First of all, have a look at the current salaries you’re paying and make sure they are at or slightly above market rate. If you’re underpaying, there’s a big chance your employee is on the lookout for another job as we speak. He or she has probably talked about it with friends who hold similar jobs. And you can't argue with that reasoning. He or she is just looking out for him- or herself. There is nothing that sours employee morale as getting underpaid. However, overpaying can be counterproductive as well, possibly creating a golden cage for employees who are not at the right place but feel afraid to leave. To get an idea of what companies comparable to yours are paying, check LinkedIn Salary, Loonwijzer or Salariskompas.
What do you want to reward?
There are several tools and methods that help you determine the right pay, such as payroll software, performance dashboards, and sales insights. However, instead of only looking at measurables, ask yourself why you want to reward your employee in the first place. Is it just because of the wonderful deals he or she closes? Or is it because your employee is an awesome coworker – always ready to help someone out? Have a look at your company values and see how they relate to your team members. A reward given for the right reasons to the right person can be a powerful tool to reestablish what your company is all about.
The million-dollar question
The right amount of the raise should be considered wisely. Too little and your team member may feel offended, too much and he or she may feel you’re setting expectations too high. As a guideline, use the current average of 3-5%. You’re free to decide whether your employee deserves more than that (or less).
Money isn’t everything
It goes without saying that you should have a close look at your budget before increasing your employees’ salaries, or else you probably won't be giving another raise for a long time If you can’t afford to give your employees a raise – or if the raise you’re able to give just doesn’t amount to much – investing in the personal growth of your employees can be the safer bet. Offering them a gym subscription, inspiring courses or concert tickets to his or hers favorite artist is another way of making them feel valuable – and it's usually a whole lot cheaper than a raise.
Make sure they constantly (okay, frequently) feel appreciated. Wendy van Ierschot, founder of VIE People, has another great tip for doing just that: ‘The positive effects of a salary increase usually last for two months. After that, the employee is used to his new paycheck. That’s why I always advice to give raises year round, instead of once at the beginning of the year. It’s an effective way to pleasantly surprise your employees.’
And sometimes, she says, it can be far more motivational to offer something else entirely. ‘Be creative about the way you want to reward your employees. I once offered a personal trainer to an employee who had a big match coming up. He was thrilled.’
In conclusion: take a look at the people first, and the money later.