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How to Determine When an Employee Deserves a Raise

Human Resources

How to Determine When an Employee Deserves a Raise

Written by Anna Lempereur for Gaebler Ventures

When should you think about giving your employee a raise? What makes an employee eligible for a raise? Find out how to give your employee the raise they deserve.

Giving an employee a raise is an important part of owning a business.

Giving raises to employees will show that you have been recognizing their hard work, and remind them their job performance is being rewarded.

Why Should You Give Your Employee a Raise?

Many employees expect raises after at least one year, and some tend to leave companies if they feel as if they are not being paid enough.

If your employee personally asks you for a raise, definitely take that into consideration. They are most likely asking for a raise because they feel like they have done something to deserve one.

Remember that gratified employees will have the incentive to perform better, which will help improve your company and keep everybody satisfied.

What Makes an Employee Deserve a Raise?

You should only give an employee a raise when they clearly qualify for one. Here are some tips for when you should consider a pay increase:

Employee has Been Working for a Long Period of Time. If your employee has been working for a significant amount of time, it is definitely time to consider giving them a raise. Loyalty is something that makes an employee eligible for a raise. After one year, you should give your employee a three to five percent raise.
Good Job Performance. Your employee must perform tasks well in order to qualify for a raise. Always set high standards, and when those standards are met, that is where a raise comes in. Employees doing a great job should get close to a three percent raise; employees who are doing an exceptional job should get a raise near five percent.
Good Sales Performance. Like job performance, an employee who can bring in a significant amount of sales into your company, deserves a raise. Employees who bring in many sales should get a raise around three percent, while employees who bring in the most sales should get a raise close to five percent. Make sure your employees are rewarded appropriately.
Employee Contributes a Unique Talent or Ability. Does your employee have any unique talents or special qualities they bring to your company? If you recognize something in your employee that makes them stand apart, you should show your appreciation with a pay increase. Not only will the raise indicate their hard work has been paying off, but it will give them an incentive to keep it up.

Be Sure Your Company Can Financially Handle Raises

It is essential to thoroughly determine if your company is financially capable of giving raises.

You do not want to lose a significant amount of profits from giving raises to employees.

To prevent this, begin with small wage increases until your company can handle something larger. Make sure to take care of your strongest employees first, and then worry about the rest.

Anna Lempereur is a freelance writer interested in writing about small business. She is currently a Journalism major at the University of Albany in New York.

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Got something to say about employee raises? We welcome your comments and questions on how to determine when an employee deserves a raise.

Chuck Ralls posted on 1/7/2009

In my opinion it is also important to understand that sometimes it is better to not give a raise if the proposed raise is not reflective of the employee's performace. Doing so may insult the employee and have worse results than not giving the raise at all. Simply explain that funds are not available.
employee posted on 1/7/2010

that has got to be the dumbest comment I have ever heard...how about being honest."here is what the company can afford, I wish I could give you more...etc."
Bob posted on 4/11/2010

I agree, companies shouldn't give raises unless the employee has been working hard.
Marisol posted on 4/12/2010

I have a staff who never greets her manager at all nor say how are you when her boss gets sick nor says thank you for any gift or raise she gets. I recommended an increase for this employee but am reluctant to give her the maximum rate. Her Manager talked to her about this and her response is she is the way she is and that as long as her performance is good, she doesn't need to be sociable or warm to anybody. Please advise. Thank you!
Ken Gaebler posted on 4/12/2010

Marisol, it's best to have well-defined criteria on how you decide what raises employees get. If getting along well with managers is part of the raise criteria, then you would have grounds to give her a lower raise and she would be incentivized to get along with her manager. Generally speaking, even when criteria for giving raises are not documented, most organizations do factor in whether the employee contributes to a positive work environment. Good luck!
Employee posted on 5/2/2010

I'm a seasonal employee at a college bookstore, and work at the store every school year from a week before fall semester to a week after spring semester. I've been there since august '08 and have yet to receive a raise from minimum wage. I am able to do almost every task that the girl who works part-time can, and some others. I feel I meet the criteria above for time with the company, I'm hospitable with customers and friendly with my co-workers (my store has 4 kind of regulars, I am one), and I provide a unique ability, as I am a bigger guy and have an easy time with heavy boxes and physical work that proves difficult and taxing for everyone else. I have asked my assistant manager about a raise twice and my manager once within the course of two months. I kind of feel blown off at this point. What is my next step? I am considering quitting, as there is no incentive for me to do the hard work that I do, and that I assume no one else wants to do. Any response is appreciated.
Jerry posted on 5/3/2010

Employee, just quit. Sometimes you get a raise when you quit. They want you to stay. If not, you'll never get a raise from those guys, so why stay?
Craig posted on 9/22/2010

Employee - give your boss a well written letter detailing all the reasons you deserve a raise and ask for a specific amount increase. Make it very polite and you may be surprised. Quitting to make a point is always an option but not a great one with unemployment so high.