How to Communicate a Pay Raise

Best Practices and What Not to Do

Business people in a meeting to communicate and discuss the employee's pay raise.
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When communicating a pay raise to an employee, the best case scenario is that it is a win-win situation. However, announcing a salary increase is fraught with details that can go wrong if you communicate the message incorrectly.

In one survey, only 13 percent of respondents said that most to all of their employees understood how variable pay, salary, and benefits work together. Nearly one-third of respondents said that most or all employees understood why raises were distributed the way they were, but 45 percent said that only some or few employees understood.

For employees to fully understand any pay raise they might receive, the communication must broadly educate them about the company’s compensation and compensation philosophy.

For example, if your company's philosophy is to give an across the board pay raise annually that is tied to specific economic factors, employees need to understand this rationale. They need to know in advance that they are not likely to receive more money than this standard in order to minimize disappointment when you communicate their actual pay raise.

The Role of Managers

While managers are not solely responsible for communicating about compensation with employees, they do play a significant role. Communications from human resources also play a role in the employee's understanding and acceptance of the total compensation package.

To communicate effectively with employees, managers must:

  • Understand their role and the value that they add when they communicate a pay raise.
  • Understand the company’s pay philosophy, such as merit increases vs. the across-the-board cost-of-living increases, variable pay vs. base salary, and so forth.
  • Communicate effectively about the pay raise so that the employee feels rewarded and recognized by the increase.

Best Practices

Schedule a private meeting with the employee to discuss their pay. During the meeting, consider, be specific about the details of the pay increase and make the employee feel valued and appreciated. Some specific tips include:

  • Providing the context for the employee’s pay raise. For example, if the company’s philosophy is to award pay increases based on merit and contribution, let the employee know the rise in pay is to show appreciation for her contributions this year.
  • Telling the employee why they are receiving a pay increase. Be as specific as you can be about the contributions they made during the year.
  • Giving the employee the amount in dollars. In conjunction with your human resources staff, tell the employee the specific amount of the hourly increase or the salary increase, if applicable.
  • Expressing faith and confidence that the employee will continue to contribute and that you will value all of their future contributions.
  • Thanking the employee for their work and commitment to your company.
  • Following up in conjunction with human resources on a written document for the employee’s file that you mail to the employee’s home address.

What Not to Do

When communicating with an employee about a pay raise, there are some statements and actions that should be avoided. These include:

  • Failing to give the employee the context for the increase.
  • Telling the employee only the percentage of increase
  • Comparing the employee’s increase to that of any other employees.
  • Comparing the employee’s performance to the performance of any other employees.
  • Failing to tell the employee why they are receiving the increase.
  • Placing the emphasis of the discussion on why the raise isn’t larger.

Potential Challenges

While employees generally will be pleased to receive a pay increase, not all conversations will go smoothly. For example, an employee may disagree with the amount of the raise or the assessment of his performance that helped determine the amount of the raise. The best way to be prepared for this is to enter the meeting with as much objective information as possible about how the amount was determined and how the employee was evaluated. If the employee still is displeased, make sure to instruct the employee on the proper protocol for lodging any complaints through human resources.