Knock, knock.

One of your employees pops in and wants to have “a chat”…

Immediately launching into a rehearsed speech about why he or she deserves a raise.

The dreaded salary increase conversation.

Whether it is an unexpected talk or part of the annual review, salary discussions can make both sides of the desk uncomfortable.

This month, we’re focusing on the biggest frustrations we hear about from business owners and executives.

We’re tackling salary discussions this week.

Here are 5 of the underlying reasons why salary discussions might become uncomfortable in your business.

1. Large increase expectations

Employees don’t always understand how raises might be allocated for any given position or year.

They might think since they changed roles this year or even duties that it equals a large pay increase. However, there are reasons that might not be true. The duties change didn’t necessitate a larger salary because the person delegated other duties, or the position is lateral rather than vertical.

Or, for example, they read in the news that the minimum wage increased 3.5% this June, so that should result in additional money. But if the employee already earns at the top of the range for a particular position or receives the full market value per hour for the job, then they might not be affected.

2. Employees don’t understand the salary evaluation process

The perception of how salaries are computed at each company varies, and while places like the government might have more clearly defined salary steps, that doesn’t always translate to a business or non-profit.

Questions that might run through your head that employees aren’t thinking about might include:

• Am I worried about losing this person?
• Do I have the budget to even consider this request?
• Is this fair to the rest of the team?
• What will happen if I say no?

A business owner or team leader will need to consider many issues before evaluating whether a person could receive an increase. And that’s NOT something the employee likely thinks about when they decide they have had enough and want a raise.

3. No compensation process in place

Some companies function under the philosophy that they should pay employees the lowest possible salary they can get away with until someone threatens to leave for a higher-paying job.

This translates into losing employees who might be excellent who just don’t want to fight for better salaries or even just an increase. And give those who squawk the loudest or are the most comfortable with negotiating the upper hand.

But most companies that struggle with salary issues just don’t have the right process set up. And that could look different for each company from a formula that shows how much effort or sales or other milestones equals X amount in salary increases to a percentage distributed to team managers to allot at their discretion.

4. Perception of performance vs. benchmarks

Certainly one of the most likely issues in salary discussions to make things uncomfortable is a person’s misunderstanding of his or her performance.

They might believe that they did an excellent job this year, and they hit all their goals. However, the reality might be that they performed exactly to the level they were expected rather than rising above the threshold.

Most business owners and managers don’t just hand out salary increases for just doing what is expected, it’s reserved for people who going beyond the duties and pitching in with extra projects, having record sales, demonstrating time and again that they lead by fixing a problem or stepping in when a ball is dropped.

Now, there may be a normal cost of living increase, but those are typically across the board. We’re focused on when employees ask for additional compensation beyond those type of increase.

5. Misunderstanding of how business performed

Employees oftentimes don’t see the full budget picture; they might see a portion of the budget for a project they are handling or a team they manage.

However, the full financial picture is often only seen by owners and top executives. They might understand when a year appears on the surface to be a banner year for the company, when in reality, it really only helped the company keep its head above water.

That’s why it’s important for either employees to have a clear understand of the company—how it’s done, how it is currently doing and the future outlook.

Being transparent (or at least somewhat) will at least help employees understand why there may not be budget this year (or next…) for salary increases.

So, have you raised your hand yet? Do you run into these same issues when handling salary negotiations with your team?

Don’t go it alone. Instead try my one-day seminars to help you navigate this and other tricky conversations.

Don’t stop there: Join the new People Program

BespokeHR is launching a new People Program, designed guide you step-by-step to maximising the performance and productivity of your team.

I want to help 500 business leaders over the next 5 years focus on their genius, make their businesses more profitable, and create great places to work in.

The program, which runs over a year, provides you with over $50K in value (for much less cost to you!) but the opportunity to save your time by giving you the step-by-step plan, tools, templates and support to help you build your dream business, offer your services or products to more people and focus on things you love doing.

Email paulettek@bespokehr.com.au for more details.