‘More pay, please!’ Are you ready for this conversation?

Eighty-one per cent of people in APAC aren’t scared to ask for a pay rise if they think it’s due, according to ADP’s report, People at Work 2022: A Global Workforce View released earlier this year. And there’s nothing like Christmas to remind people of what’s in their back pocket, so HR and managers should be prepared to have staff approach them about increasing remuneration.

Be transparent and organised

HR and people leaders should always be ready for employees seeking to ‘up’ their pay; it’s a rare person who wants to work for the same money year in and year out. With this in mind, businesses should have a solid framework for assessing pay on a regular basis, making sure each employee is paid fairly for the work they do, and in line with market norms.

HR Leader has recently covered the Mercer Australia Total Remuneration Survey 2022 and SEEK's October Advertised Salary Index.

Communicate with your employees about when they should expect their pay to be reviewed, and how that review is conducted. It’s also wise to let employees know how to raise salary questions if they should wish to do so outside a set review period. Taking this open and clear approach with staff gives both parties the opportunity to have vital conversations about pay, and hopefully avoids employees jumping ship because they don’t feel they’re being paid fairly and don’t know how to fix it where they currently work.

Author, executive coach and HR director Justine Figo was asked by HR Leader what employers should do when staff ask for a pay rise. She said: “Many of us in HR have already seen a significant increase in approaches for higher pay, or we will see a significant increase in approaches in the new year.”

She continued: “The first step is to consider whether there’s a systematic issue the organisation needs [to] address, for example do we need to review salaries to meet market rates? The second step taken by leading HR practitioners is to frame the conversation around the whole person and the whole employee value proposition. Examples can include everything from reviewing car allowances to providing financial education to help employees fight the pressures of inflation.”

Think carefully about the cost of saying no

All too often, an employee asks for a modest pay rise and the business’ default response is to say no, and to then quite happily pay out the same if not more money to hire someone new into the role. This may suggest a disconnect between the person signing off the budget for the pay rise, and the person responsible for hiring costs. It also may suggest a lack of foresight about all the additional costs that come with hiring someone new.

HR Leader reached out to Morag Fitzsimons, the national manager – employee care, people solutions at Lockton to ask her thoughts on how employers should handle it when an employee asks for a pay rise.

Ms Fitzsimons stated: “Now more than ever, it is important to understand the genuine cost of turnover in your business. The cost of this is greater than the SEEK ad required to replace these staff. Quantify this by considering loss of productivity from down time it takes to fill roles. Do you have a ready supply of workers available with the skills to replace anyone who may leave? What is the time commitment to review applications, interview, shortlist, interview again and then make an offer? Multiply this estimate of hours spent by the hourly rate of the individual(s) involved in the process; time taken to induct and train a person to fulfill the role – it could be 3–6 months before the person is up and running, depending on the nature of the role.

“Once you know the cost of turnover, weigh this up against what an individual may be asking for and consider if that extra increase an hour is better than incurring the cost and business interruption of replacement,” she suggested.

Remuneration as a tool to encourage workplace values

Regardless of who is asking for a pay rise and when, pay increases can send a very strong message about what an organisation values. For example, if you want to encourage teamwork but continually reward a star performer in the sales team who treats colleagues poorly, you’re not using one of your best assets: pay, to send the right message.

When Niall O'Rourke, Sharp & Carter partner, spoke with The HR Leader September this year, he gave an inspiring example of how they recognise all their staff equally with a yearly ‘away event’. He said: “What we do differently here at Sharp & Carter nationally, is we all as partners, agree on a number every year. If it’s achieved, everyone goes away together.

“It’s probably one of the greatest cultural pieces that I have seen. Having come from environments where it is just the top two or three per cent [of staff that] get rewarded, that everyone gets rewarded,” he added.

Be creative

Ms Fitzsimons also shared with HR Leader some ideas for rewarding staff other than through money. She stated: “Don’t assume you know what the person needs and if you can’t afford the cash uplift, consider what other ways you can give the person more value back in their lives e.g. increased flexibility, change in work patterns to better suit their family needs, additional training or education or negotiate a staggered increase over the next 12–18 months e.g. a steady incremental increase across the year.”

Some other ideas could include extra annual leave or a decrease in weekly work hours, opportunities to work from other sites if you have them, help with travel costs ... the list goes on.

Get the basics right

And it’s always important to remember the fundamentals, like paying your employees on time. In a recent statement, ADP highlighted that they’ve discovered: "Two in three workers (64 per cent) are still experiencing underpayment issues".

ADP’s Irina Shainsky, legal director for ANZ, stated: “It is more important than ever that employees are closely reviewing their pay and having conversations with their employers if issues arise. Employers have a responsibility to ensure they have the right systems in place to address payment issues.”