10 January 2024

10 Big Things to Think About When Deciding on a Raise for an Employee

By Ronald Smith

When I go to my boss and ask for more money, I have to be really confident in myself. And my boss has to make some tough choices too about why they should give me a raise or not.

There’s no rulebook for bosses and business owners to figure out if someone really deserves a raise or not. There are lots of different ways to decide if an employee should get more money. Things like how much value they add and the support they give to the team – those are important. But there are other things to think about too. So we talked to 10 business owners from the Young Entrepreneur Council (YEC) and asked them this question:

An employee just had a conversation with me about wanting a raise. What should I consider before deciding whether or not to give them one? And why is this factor so important?

Why I Might Give Employees a Raise

Here’s what some people in the YEC community said:

1. How They’ve Improved

A raise should be given based on improvement. What has the employee accomplished in the past year? Have they gained new skills, expanded their knowledge, or produced higher quality work? I look at these things to determine if they deserve a raise. – John Rampton, Calendar

2. Their Value to the Company

When determining whether or not to give an employee a raise, it’s important to assess the value they bring to the company and recognize their level of contribution. Ask yourself: Are they an exceptional employee? Do they take on challenges with a positive attitude? Do you see their potential for growth and advancement within the company? – Nicole Munoz, Nicole Munoz Consulting, Inc.

3. The Skills They’ve Acquired

Discover if your employee has taken advantage of any training opportunities provided or if they have independently learned new skills. Having additional skills and being familiar with our business processes make them a valuable asset that is difficult to replace. Consider their expertise and how it can contribute to your decision on offering a raise. – Blair Williams, MemberPress

4. Shared Values and Company Vision

When evaluating an employee, it’s crucial to determine their conviction and commitment to the company. Are they aligned with our values, and does it show in their daily tasks and productivity? Do they bring value to the table? Are they helping us generate profit and benefit the company in some way? We need to prioritize and reward our most loyal and effective employees, and ultimately, the final decision lies with you.

5. Their Potential

We see our employees as individuals with limitless potential, just like us. When it comes to giving raises, we consider their performance, but the percentage increase largely depends on their potential and the effort they put in with the company.

6. Their Influence on the Team

You know, it’s often tempting to judge people solely based on how much they make or what others in the industry are earning. But let me tell you, there’s something more to it when it comes to certain individuals on your team. Take, for example, those team members who may not be the absolute best, but they have this special quality that boosts morale and inspires everyone around them. And let me tell you, that kind of positive influence can really amp up the whole team’s productivity. ~ Andy Karuza, FenSens

7. The Way They Ask for It

Now, when someone asks for a raise, I pay attention to how they go about it. Did they approach me in a one-on-one meeting or in front of the entire team? Was it a casual remark or a serious question? Did they take the time to do their homework before asking? Have they clearly explained why they deserve one? If they’ve put some thought into it, I’m more inclined to have a discussion and possibly even agree. ~ Thomas Griffin, OptinMonster

8. Their Time With the Company

I know that when someone at your company believes they deserve a raise, it can be tough to make a decision. But before you give it to them, it’s important to think about everyone else too. For example, if there’s someone in the same department who has been there longer, they should get the raise instead. It’s all about being fair in all areas of business, so that no one can accuse you of playing favorites. ~ Stephanie Wells, Formidable Forms

9. Timing and Motivation

Before you start figuring out the numbers, take a moment to think about the timing and motivation. Did their financial needs increase? Did they achieve something important? Have they been with the company for a certain amount of time? Do they feel like they’re not being paid enough or they’re overwhelmed with work? These are all important factors to consider. Sometimes, what they really want isn’t just the money. ~ Joey Bertschler, bitgrit

10. Alternatives to Raises

If you’re just starting your business and your entrepreneurial career, you might not be able to give raises in wages or salaries. But don’t worry, there are other options that can still make your employees happy. You can give them performance-based bonuses, more paid time off, or a more flexible working schedule. In many cases, employees might even prefer the flexibility over a one-time pay increase. ~ Jared Atchison, WPForms