How to Give a Pay Raise

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When you are a manager, review time can be a challenging task. Part of the challenge is not only giving a fair and honest performance review, but a well deserved pay raise. Here are some tips that can help in considering performance merit increase for your staff.

Things You'll Need

  • Budget
  • Performance Report
  • Senior management guidance and approval
  • Budget: Find out how much money you have allocated to work with. This is especially challenging if you have more than one staff and you can only work with a certain budget. Keep an open mind when budgeting. Allocating a budget is also based on the overall company's earning the previous year. The increased productivity is met when the employees work harder, so reward accordingly.

  • Performance Rating: You would need to allocate merit increases that are commensurate to performance. Allocate a higher pay raise to your strong performers. Normally a 3-5% pay raise is acceptable. For your weaker performers who show improvement from the previous year but still needs to improve to be strong performers, you can allocate between 1-2%. For your worst performers you do not have to give them a pay raise to give the message straight to their bottom line so they can make dramatic improvement next year.

  • Keep your strong performers happy, make sure that they get the raise that they deserve so that they will not leave you for greener pastures.

  • If you have any left over on your budget after giving the merit increases, try to see if you can use the remaining dollars towards performance bonus for your top performers.

  • In a big corporation, your allocation would go through a chain of approvals, make sure that you get their approval by documenting why you are giving that amount and provide a copy of the performance review if needed.

Tips & Warnings

  • Do not talk about your employees pay raise allocation with other people.
  • Do not divulge to your employees about the planned raise you are giving if you haven't received the final approval yet, even if you already got a verbal approval, you need a final written approval to keep your bases covered for there can be last minute changes. Your credibility will be at stake if you are not careful.
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