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Jul 15, 2023

10 Ways to Tactfully Decline Your Employee's Request for a Raise

Sometimes, leaders aren’t able to grant an employee’s request for a raise,

Sometimes, leaders aren't able to grant an employee's request for a raise, whether it's because there's no budget for it or because the person's performance or skill set doesn't currently warrant one. In either case, leaders need to focus on tact and kindness when declining the employee's request — a task that may feel awkward or uncomfortable for leaders who have never done it.

To help leaders in this situation, 10 Young Entrepreneur Council (YEC) members answered the following question:

"Whether your business is on a tight budget or you simply don't agree with your employee's reasoning, there may come a time when you have to decline a request for a salary increase. To do this effectively — and tactfully — what's one step a business leader should take, and why?"

Here are a few approaches they recommend you take.

"When tactfully declining an employee's request for a raise, give them hope for the future (if it's genuine). Company on a tight budget? Fill them in on your plans to increase profitability, and reward them financially when that happens. Don't agree that their skill level merits an increase? Give them three ways to improve their performance and tell them they’ll be rewarded for it. An employee without hope for a better future becomes a liability; don't let that happen." ~ Brian Greenberg, Insurist

"When declining a request, show the employee how they can make the money they want to make. Help them set a clear and SMART goal — a goal that is specific (to their job), measurable (objectively assessed), achievable (not seemingly impossible) and relevant to their job (or promotion position), and that has a time frame in which they should complete the goal to be able to earn the raise or promotion. Then support and watch them grow!" ~ Devesh Dwivedi, Devesh Dwivedi

"Decline a salary increase request quickly, honestly and privately. If it's budget related, tell them there aren't the funds or give them a counteroffer with other forms of compensation. If you don't agree with the reasons, explain that their performance or skill level isn't where it needs to be, offering constructive feedback on how to get there. In both cases, offer to revisit the conversation in six months." ~ Diana Goodwin, MarketBox

"With the exorbitant inflation rates, not every request for a salary increase can be granted. Design a process based on performance that caters to top talent and cascades down. Whenever extra yield cannot be approved immediately, set a short-term action plan with some targets that would allow for an increase in the next few months. Some flexibility with days off or extra perks can help." ~ Mario Peshev, DevriX

"Transparency and empathy are the two primary needs of an employee when they’re being denied a big request. Clear yet tempered communication as to why, no matter how challenging it may be, shows that you respect them as a professional, which is kind. Sitting with them as they navigate disappointment will make them feel cared for and seen as a human and will allow them to continue to still connect to you and the team." ~ Nic DeAngelo, We Buy Loans Fast

"If your business can't increase an employee's salary, it's important to make a plan for when it can happen in the future and to share this with your employee. It may satisfy them to know that you believe they’re worth it. It's even more important to keep your word once you make such a plan or else you’ll risk damaging your relationship with this employee and others who may hear about it." ~ Blair Williams, MemberPress

"When declining an employee's request for a raise, switch the focus before delivering the bad news. Focus can be switched by first telling them how valuable they are to the company and that you appreciate their work. Then, tell them that you understand that they need the extra money and that you aren't disputing they are worth more pay; however, now is not the right time for it." ~ Baruch Labunski, Rank Secure

"I think it's important to be transparent and honest with your employees. If you decline a request for a salary increase, explain the reasoning behind your decision. Be clear about the company's budget and discuss what the employee can do to earn a raise in the future. This will help the employee understand your decision. Also, offer training or some other benefit in lieu of a salary increase." ~ Syed Balkhi, WPBeginner

"It never feels good to tell someone who works hard for you that they can't get what they want. However, you can mitigate some damage by pulling specific data points to cite your decision. There's a big difference between ‘You’re not getting a raise’ and ‘I can't give you a raise, and here's the data to show why.’" ~ John Brackett, Smash Balloon LLC

"There should be a mechanism for an employee's growth or salary increase. Accepting such requests on an ad hoc basis is never favorable for the company. If you have a mechanism in place, your decision to approve or reject a request is backed by logical reasoning (employee performance against the set deliverables or targets). And with that, the chances of conflict are already minimized." ~ Stephanie Wells, Formidable Forms

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