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Payroll & Taxes

What Should Employers Know About Giving Employees Raises?

David Peasall, VP, Human Resources
by David Peasall, VP, Human Resources on February 25, 2015


What Should Employers Know About Giving Employees Raises?Raises for the right reasons can be very effective. Occasional pay raises are a crucial part of running a successful business and retaining good employees. When your employees work hard and continue to perform well over an extended period of time, it’s important that you recognize their contributions by raising their pay.

It’s also a good idea to consider adjusting the overall rate of compensation for your employees if economic or company factors change, such as an increase in the general cost of living. This will keep you competitive with the open job market. Keep in mind that rewarding employees for good performance can be achieved in different ways—such as bonuses or increased benefits. Consider the best pay options available to you.

Know about laws related to pay rates

It’s important that you follow all local and federal laws when giving raises. Some states have laws that impact when and how a business owner can decide the rate of pay for employees, so it’s important to check your local laws regarding compensation before issuing a raise. Also, it’s important to make sure that pay raises don’t conflict with equal-pay laws or laws that deal with discrimination.

Communicate appropriately, and be open to ongoing pay rate inquiries

If you decide to issue a pay raise across the board (say because of the cost of living has increased), then it’s fine to make a general announcement. However, if you’re issuing a raise to a particular individual, then it’s crucial to communicate that information in a private manner directly with that employee. A supervisor, manager, or HR manager should be present to communicate the raise (or any change in pay), and the employee needs to have access to all of the relevant HR documents.

Many employers think that it is acceptable to ask an employee not to discuss their pay and benefits with other employees, but that is not the case. Employees have protected rights under the NRLA (National Labor Relations Act) to discuss compensation and benefits openly.

And when an employee wants to discuss compensation with their employer, it’s important to hear them out. However, an employer should never discuss what other employees are paid. In the event an employee is disgruntled about not receiving a raise, hear them out, and work with them to determine a reasonable solution.

Happy employees are good for business

Your employees are important to the overall success of your business, and compensation is a critical factor of their job satisfaction. If you are able to maintain competitive pay it can have a very positive impact on retention and job performance. So if you have the opportunity and means to offer raises, it’s good business to do so.

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David Peasall, VP, Human Resources
ABOUT THE AUTHOR
David Peasall, VP, Human Resources

David Peasall joined FrankCrum in 2010. Since that time, he has served as the Vice President of Human Resources. Serving in the Army, he began his 20+ year career in human resources and benefits administration and has held several management positions within the corporate and public human resources environments overseeing employee benefits sales and administration, recruitment, compensation, employee relations, organizational development, and compliance. He has the nationally recognized designation of Senior Professional in Human Resources (SPHR), PPACA certification from NAHU, and a Bachelor’s degree from Barry University with a dual major in Human Resources Management and Health Services Administration. He has written for the Society for Human Resources Management, HR Insight, Proyecto Magazine, and for online publications in the restaurant and health care industries. While not at work, this Florida native loves spending time with his family, preferably boating, fishing, and diving the beautiful waters of Florida.