With average employee turnover rates predicted to rise from 20.5 percent to 23.4 percent over the next 4 years—according to a Hay Group study—it seems that an effective talent retention strategy is going to become an increasingly important differentiator for years to come.
Employers will need to get better at: identifying ‘flight risks’, addressing the issue and re-engaging them back into the workforce. I call it ‘re-hiring’. One situation where employees may need to be re-hired is after they have had a pay rise request turned down.
Because when an employer turns down a pay rise request it can lead an employee to feel as if his/her efforts are not recognized and that the individual’s career progression has been limited. Studies show that lack of recognition and lack of career prospects are two of the most powerful drivers of voluntary turnover.
This means that turning down a pay rise request can be one of those crucial triggers that can lead employees to re-evaluate their futures with you, and perhaps leave in a few months time. This is why I recommend that if you are going to turn down a pay rise request (and of course it’s your decision), do so in a way that maximizes your chances of retaining and re-engaging that staff member. So, how can this be done? I have set out some tips on how to do this below:
1. Challenge them to justify the raise
Challenge them to justify the pay rise, which means asking employees to put in writing what their reasons are for a pay rise request. Ask them to outline:
- What additional responsibilities they have taken on
- What additional responsibilities they would be prepared to take on
- Outstanding achievements
- Any above-average appraisal scores
This will help to educate them as to how the pay rise process works; that is, that they need to have expanded their role or need to show they are contributing more than the average employee to justify a greater reward.
2. Give a reason for turning down the request
Of course, if they meet all the four criteria above you will need to seriously consider a pay rise request as turning them down will make them feel rightly unrecognized for their achievements. It may also make them feel that their career development options are limited, turning them into a flight risk. At the very least if you couldn’t afford a raise at that time, perhaps you could give them a future time frame (when budgets renew) when you can afford the raise.
If they haven’t met these criteria sufficiently well, then you are much more justified in turning down a raise and your employees may feel less “wronged” as they will understand the reason that the raise has been refused. But don’t leave them out on a limb with no hope. Try and put together an improvement schedule with goals for performance improvement and taking on additional duties, and promise a pay review (not pay rise) at the end of this performance period. Include opportunities for training and development too. This approach will give the employee hope as they will feel that they are valued enough to be invested in, with relation to training, and they will feel there are career development opportunities that they perhaps didn’t realize existed before.
Saying no to a pay rise request in this structured way will mean that you are more likely to re-hire an employee and not drive him or her away.