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When To Give A Raise

I'm new to being a manager, so I'm not sure what is the best way to look at the situation. I have an employee who is a great employee. I recently gave him a 10% raise. He works in the payroll department, so is able to see other employees' pay rates. I feel like he's getting fair pay based on his education and experience. New employees were recently hired in other departments. These employees are being paid 30% more than my employee. I think these employees are probably being paid much more than their experience indicates. I am 100% confident that my employee has the ability to handle the jobs that these new employees are doing. My employee has not made any complaints about his pay. I feel that I should give my employee a raise to get him closer to the new employees. The only reason I would consider giving the raise, is because he can probably see the other salaries, and I know he is as good of an employee as the new hires. I just think the new hires are being overpaid.

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

HR, should not set salaries, they should research and present what "market" salaries are as a guide to a) the budget and b) the hiring managers.

HR should do compliance, and benefit administration, period.

They should never be involved in talent acquisition.

Anonymous
(Corporate Controller) |

HR should NOT be involved in talent acquisition?!?! Did I read that correctly?

(Agent, JKS Solutions, Inc.) |

HR should only forward the received Resumes to those managers hiring new employees for their departments. The managers should select the candidates for job interview, and effectively interview them. HR should only provide a listing showing market salaries for the position before bringing a candidate for job interview. HR should not be involved in selecting the candidates for job interview in accounting-finance, unless the HR person has background in accounting-finance.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Anonymous (Staff) is 100% on the money.

Who "sets" the budget for staff?
Who knows what the role is to be?
Who knows who is correct (or assumed to be correct) for a given slot

The answer is the hiring manager who will have to work with, and manage this new employee.

Will HR be involved, sure from a compliance point of view and benefit administration, but they shouldn't set any "bar" or be part of any interview process outside obtaining compliance information.

Think about it, you are looking for a CFO position. Does the entry-level HR person or even the HR Director really know what your job is about or is able to gauge your work and life experiences vis a vis the job or the CEO strategic and tactical plans?

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Jeff Eby
Title: Accounting Manager
Company: Rexel USA
(Accounting Manager, Rexel USA) |

Talent does not always translate into performance. The ability to accomplish results as in a team environment is very important along with a having a strong work ethic and commitment to do a quality job.

DANIEL POIRIER
Title: Chief Financial Officer
Company: Pro Tech International
(Chief Financial Officer, Pro Tech International) |

The first thing I would recommend is that if this employee is being paid fairly based upon his experience, skill set and the needs of the business, then do not follow up another managers mistake with one of your own. The fact that other managers are allowed to overpay their employees should never be a reason to overpay employees in another department. This employee has not brought this to your attention yet, so I also would not stir the hornets nest just yet. What you can do, however, is make sure that you are providing your employee with a positive work environment and your support in helping him build upon his skill set so he can qualify for greater responsibilities, and thus, a larger pay check.

As a manager in the finance/accounting department, you are going to have to contend with this issue throughout your career. Access to payroll information is always one of the more troublesome aspects of our chosen career. You can not keep employees with access to this information from comparing their pay to others. The real trick it so keep them from becoming discouraged by what they see. The work place has never been fair and inequities will exist. It is also critical that he understands the need for confidentiality. It doesn't sound like you have that issue, but it is definitely worth mentioning.

On a final note, as the Controller, it is your responsibility to voice your opinion, to your VP or CFO, whichever is appropriate in your company, about costs that you believe are creating a lower value for the expenditure. Labor costs can easily get out of hand when hiring managers pay based on personality instead of focusing on the value of the task for which they are hiring. Unfortunately, this can happen if the Controller is weak or is not doing his job. The Controller position is the conduit for all costs associated with the business, so make sure to focus on the cost/benefit affect of those expenditures and speak up when you see trends that work counter to profitability.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I disagree with this point of view (well...the not stirring the hornet's nest part at least). EVERYONE is responsible for the culture of the company or ANY policy that affects it. One can voice out an issue without stirring the proverbial hornet's nest. Everything else, especially keeping the employee "happy" and "encouraged (positive work environment), I agree. But this will only work to an extent.

I point to Tim Cook's example...."As Dr. Martin Luther King once said, the time is always right to do what's right. At Apple, we do the right thing. Even when it's not easy. If you see something that doesn't meet our standards, speak up. Whether it's a quality issue or a business practice, if it affects Apple's integrity, we need to know about it."

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

As a PS.., I mistyped (delete the word "not"), it should read...

"the stirring the hornet's nest part at least

Bob Low
Title: Principal
Company: Perron & Low
(Principal, Perron & Low) |

Pay your employee a fair rate based on the market. Comparing to other employees is almost always going to be frustrating -- your payroll person may appear underpaid compared to some and overpaid compared to others. You also probably don't know all the circumstances behind other people's pay; they may have a hard to find skill or may be performing at a higher level than you can see. Bottom line is there will always be accounting team members who are privy to salary info and I essentially give them the same message: they can use market data to support a request for a raise but not comparisons to other employees.

Deborah Crockett
Title: Human Resources Manager
Company: PowerRail Distribution Inc.
(Human Resources Manager, PowerRail Distribution Inc.) |

In a perfect world... the company would have a dedicated recruiter that does company branding (in conjunction with the Marketing Department), recruiting, market salary research, initial screening (not just basic skills, but with a knowledge of the company culture and vision,) and present candidates to the hiring manager along with salary comps (or, even better, the company would have pay grades in place.) Hiring managers would schedule interviews and present candidates to exec teams for final selection and HR would onboard.

However, in smaller companies there are no dedicated recruiters and most often the HR staff perform those functions.

Back to the original question: who approves salaries in your company? Does each department manager determine how to allocate their salary budget? Are you providing total compensation statements to employees? Would your employee be more motivated by percs other than salary (educational opportunities? flexible scheduling? other?)

As the Controller, do you have conversations with other department heads about salaries? Is there a corporate guideline? If not, should there be?

Inflating the bottom line shouldn't be the first choice. I would recommend a company-wide compensation audit to determine if your employee is underpaid or the other employees are overpaid in their fields of expertise. Then, if an adjustment is indicated, you've got the justification for it. If the evidence proves there is a justified reason for the salary inequity, your employee will know that his salary has been objectively applied.

Anonymous
(Controller) |

The owner makes most salary decisions. I have leeway to give small raises. It's a small company. I would probably need his approval to give the 30% raise needed to put him on par with the new hires.

Mark Sutherland
Title: CFO
Company: Profit By Design CFO & Controller Servic..
(CFO, Profit By Design CFO & Controller Services) |

I encourage my clients to set a policy whereby they pay their entire staff "X" factor relative to market average (i.e. 1.0, 1.10, 1.20, etc.). "Market Average" can be determined using Robert Half's salary survey (for acctg and finance), or the Bureau of Labor Stats I believe has a wage survey by county. I find it simplifies the conversations with employees when you can say, "You are being paid "X%" above the average in the region". This is a practical solution as well. If you're paying below market average, you're likely to see above average turnover because of the availability of higher paying jobs offered by other local businesses who are competing for talent. Adjustments can and should be made for super-performers.

Anonymous
(Controller) |

This employee is right at the bottom of the Robert Half salary range.

Anonymous
(Associate) |

I read a couple of things that seem relevant. "I think these employees are probably being paid much more than their experience indicates." That would be my first task, to see why they were given the salary they were. Are they experienced with a proven track record? Were they hired away from somewhere else? It doesn't sound like you know for sure.
The second line I read that I see as important: "I am 100% confident that my employee has the ability to handle the jobs that these new employees are doing". The fact is your employee isn't doing those jobs. He/she may be able to perform them, but was hired to do something else, something that may simply have a lower pay scale. If your employee is being paid a fair wage, it's up to them to apply for a higher paying position if he/she wants to earn more.

Anonymous
(Controller) |

Yeah, I never saw the resumes for the new employees. But I know they are being trained from scratch. Not sure if that's due to learning the way we do things.

I would hate to lose him from my department, but if I knew he could get a 30% raise by switching to another role, I would have tried to get him there.

ArLyne Diamond
Title: Owner - President
Company: Diamond Associates
LinkedIn Profile
(Owner - President, Diamond Associates) |

In an ideal world you would have the freedom to choose who to compensate and how much. I suspect though that your firm has created policy around raises and promotions and of course you need to find out what those are.....

Having said that, a raise is a reward for work well done - not for titles, or seniority. So, I would reward this employee piecemeal - maybe a few percentages at a time as he (or she?) earns a special thank you for work well done. If you give the raise all at once, it will soon lose3 its effectiveness.

In my Proformative course on Rewards and Recognitions I discuss reinforcement theory which suggests that rewards be given intermittently as deserved - but that there is the possibility of regression to the mean (going back to the way it was) if a one time reward is given - time passes and reinforcement is not given anymore.

So, if you have the power - the authority - give this person his/her rewards piecemeal and either as a particular success takes place, or randomly.

Ross Anderson, CPA, MBA
Title: Controller
Company: TFS Capital
(Controller, TFS Capital) |

Anon, pay the man what he is worth. Otherwise he may try to get what he's worth elsewhere. Also, try to promote him and fully-utilize him.

Anonymous
(Controller) |

I think hes getting what he's worth. I doubt he could get more from another company.

I think the problem is the new employees are overpaid.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

If the others are overpaid, then you make him whole. I have never found a company where people don't know what each other makes.

Morale is an extremely expensive commodity to loose.

Ernie Humphrey CTP
Title: CEO & COO
Company: Treasury Careers
LinkedIn Profile
(CEO & COO, Treasury Careers) |

Wayne and Emerson involved, I need to weigh in! Many companies hire people in at compensation levels above those with whom they work or even report to in too many cases, Bad idea. You need to keep the value hierarchy in line. Great employees are hard to find, yes, but keeping the ones you already have that know your company and its markers are much more valuable.

Devang Bhatt
Title: Sr Manager
Company: Radius
(Sr Manager, Radius) |

I would not like to preach management or leadership rules from the book.

This is what happens in reality.

There are two categories of employees,
1. who secure pay raise in their existing job (by effective canvassing, top level connections and going the extra mile.)
2. who get pay raise they deserve, only by switching over jobs.

Your team member is presently in category 2.

Now if you feel sorry and give him a raise you will yourself become an employee in category 2. :-) i.e. if you are reporting to someone in your company.

You should take such a decision only if you are able to manage your department's CTC after doing this and your line manager happily agrees with you.

For any corporate, employees are assets, their pay is a liability.
Successful managers do not give rise to a subordinate who does not speak for himself. this is how they save hard cash for company (or may be their own CTC negotiation.

I understand this post will be criticised but look at this after 5 years and then decide whether this does happen.

(Agent, JKS Solutions, Inc.) |

The problem with giving the raises seems to be the owner and HR, who probably reports to owner.
If the payroll person deserves a good pay, then I would promote him/her, and the new job title will include the word 'senior': senior payroll administrator, senior payroll accountant; senior etc. In this way, the owner and HR won't comment on your decision to increase the salary even if that raise has to be 30%.

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