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Even the best-prepared leaders can find it challenging to respond to pay rise requests, particularly during economic downturns. This guide provides practical, real-world scenarios and word-for-word responses to help you navigate these crucial discussions with confidence and care.
Here are some of the most frequent situations you’ll encounter and how to handle them effectively:
Employee: “I’ve been performing well and would like to discuss a salary increase.”
Response: “I appreciate you bringing up your pay rise request, and you’re right – your performance has been strong, particularly on the Johnson project. We’re currently under a company-wide salary freeze due to market conditions.
“However, I’d like to discuss alternative ways to recognise your contributions, such as leading our new client initiative, which could position you well for advancement when market conditions improve. Would you be open to exploring these options?”
Employee: “I’ve received an offer with higher pay from another company.”
Response: “Thank you for being upfront about this. While we can’t match the salary offer right now due to our current financial constraints, I value your contributions and want to understand what aspects of your role and career growth matter most to you.
“Could we discuss a salary negotiation and development plan that includes increased responsibilities and a compensation performance review in six months? I’m also authorised to offer additional Paid Time Off (PTO) and flexible working hours immediately.”
Related: How to conduct a 360-degree appraisal
Employee: “I’ve learned that colleagues in similar roles earn more than me.”
Response: “Thank you for raising this concern. Pay equity is extremely important to us. While I can’t discuss other employees’ specific compensation, I want to ensure you understand how we determine salary bands and where your role fits. Let me walk you through our framework and the factors we consider, including experience, specialised skills, and tenure.
“I want to work with you to identify gaps in these areas and create a development plan to address them. Although we can’t adjust salaries immediately, I commit to reviewing your compensation against these benchmarks in our next review cycle.”
Employee: “I’ve taken on several new responsibilities since my last review, and I believe my compensation should reflect this.”
Response: “You’re absolutely right to bring this up. I’ve noticed your expanded role, particularly in leading the marketing automation initiative. While we can’t increase salaries right now, I want to formally acknowledge these new responsibilities. I propose to update your title to Senior Specialist, with a pay increase in the form of a spot bonus of $3,000 and priority consideration for the Team Lead role opening up in Q4.
“I’d also like to enrol you in our leadership development programme, typically reserved for management positions. Can we discuss how these professional development opportunities align with your career goals?”
Related: The role of salary transparency in reducing workplace inequality
Employee: “I’ve consistently exceeded my targets and brought in significant revenue. Shouldn’t this merit a raise?”
Response: “Your outstanding performance hasn’t gone unnoticed – you’ve exceeded targets by 130% this year. While base salary increases are frozen in our current climate, I’ve secured approval to restructure your bonus scheme.
“Based on your current performance levels, this would increase your earnings potential by 20%. I can also fast-track you for our high-potential programme, which includes executive mentoring and priority for promotion when positions open up. Would you like to review the details of this enhanced incentive structure?”
Employee: “I’ve completed several certifications and improved my skills. I believe I’m now worth more to the company.”
Response: “Congratulations on your professional development – achieving those AWS certifications is a significant accomplishment. You’re right that this increases your value to the team. While we can’t adjust base pay currently, I’ve created a new ‘technical specialist’ designation that comes with a quarterly skills bonus of $1,500.
“I’d also like to create a new cloud architecture working group with you as the lead, which includes a project leadership allowance. Additionally, would you be interested in becoming our internal AWS training leader? This role comes with its own compensation structure.”
Employee: “I’ve been approached by recruiters frequently, and the market rate for my role seems much higher.”
Response: “Thank you for being transparent about this. You’re right that the market is active for your skills, and we want to ensure you continue to grow with us. While we’re limited on base salary adjustments now, I can offer an immediate retention bonus of $8,000, split over the next two quarters.
“I’m also creating a personal development fund of $2,000 annually for you to use on any professional growth activities you choose. Most importantly, I want to map out your next career move with us – I see you as a potential candidate for the Regional Director role we’re creating. Can we discuss what that path might look like?”
For guidance on how to respond to pay rise requests, see our companion article: Managing Salary Conversations During Economic Downturns: A Leader’s Guide to Basic Principles
High performers who are underpaid present a unique challenge during downturns – they’re often your most valuable team members, yet also the most at risk of departure. Here’s how to approach these crucial retention conversations:
For your top performer who’s below market rate: “Suzu, your impact on the team is exceptional. While we can’t adjust salaries right now, I’ve secured approval for you to lead our biggest upcoming project. This includes a 10% project bonus and exposure to senior leadership. I’m also committing to a compensation review in Q3 when our financial situation is projected to improve.”
For experienced high performers: “Eng Wah, your expertise is invaluable to us. I want to be transparent – while we can’t offer a raise now, I’ve advocated for and received approval for you to attend three industry conferences of your choice this year, plus a dedicated learning budget. I’d also like to create a formal mentorship programme with you as the lead, which includes a stipend. Let’s also set a concrete timeline for reviewing compensation once our key financial metrics recover.”
For the highly skilled technical expert: “Shah, your deep expertise in cloud architecture has been crucial for our digital transformation. While we can’t match market rates right now, I’ve arranged for you to spend 20% of your time on independent research and development projects.
“Additionally, we’re adding a technology leadership allowance of $500 monthly for your role as our cloud champion, and I’ve secured a budget for you to build your own small team by Q3.”
For the revenue-generating relationship builder: “Krystine, your client relationships have generated consistent growth even in this downturn. Although we can’t adjust your base salary now, I’ve restructured your commission framework to increase your earning potential by 25% on new business.
“I’m also adding you to our executive client advisory board, which includes a quarterly bonus and fast-tracking your promotion to Senior Manager once we hit our Q4 targets.”
For the creative problem-solver: “Adrian, your ability to innovate and improve our processes has saved us significant costs this year. While we can’t offer the raise you deserve right now, I’ve created a special innovation bonus structure where you’ll receive 15% of documented cost savings from your improvement initiatives. I’m also giving you first right of refusal on our new digital transformation projects, each with its own project completion bonus.”
For the high-potential future leader: “Yakita, your leadership potential is exceptional, and I know you’re currently under market rate. While we can’t adjust your base pay now, I’ve enrolled you in our executive leadership programme, which typically requires a senior director level.
“This includes executive coaching worth £10,000 annually, shadowing opportunities with our C-suite, and priority consideration for the regional director role we’re creating next year. I’m also adding you to our high-potential bonus pool, which pays out quarterly based on company performance.”
Related: How to structure effective job interviews: A guide for hiring managers
When facing compensation constraints, organisations need to develop comprehensive strategies that focus on immediate retention and long-term engagement.
While competitive pay remains important, employees who feel valued, see clear growth opportunities, and understand their path forward are more likely to stay, even when immediate financial rewards are limited.
Successful retention strategies combine tangible career development opportunities with transparent communication about future possibilities. This approach helps maintain employee motivation and commitment while building a foundation for sustained engagement that extends beyond compensation alone.
Here are key elements to consider:
Create opportunities for employees to gain valuable experience and skills that increase their market value. This might include cross-functional projects, leadership opportunities, or specialised training.
Keep regular development conversations active and encourage employees to ask for a pay rise if they feel deserving. Use tools like career mapping and skill assessments to show progress despite limited financial growth.
Be explicit about how employees will benefit when business conditions improve. Document commitments and create clear triggers for when compensation reviews will resume.
To ensure fair compensation for each role and improve transparency around career paths, consider using resources like the Michael Page Salary Guide to benchmark average salary ranges in your industry. Employees value when their company openly references trusted, up-to-date data sources and shows a commitment to pay equity by making compensation decisions based on market standards.
Remember these key principles when handling compensation discussions:
Get a comprehensive view of salaries across various industries and roles with our 2024 Page Insights Salary Guide, which features the average salary of roles in Malaysia’s dynamic job market, or use our Salary Comparison Tool to see how your compensation compares to industry standards.
Read more:Why should someone be led by you?How to prevent employees from job hoppingHow leaders can gain better engagement with their teams
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