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.
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.
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.