How to Handle Salary Reviews

How to Handle Salary Reviews

31 December 2021

If there’s one area that I believe needs a total rethink in regards how we expect managers to behave, it’s salary reviews.

When the manager was invented, everyone knew where they stood. The manager was your boss, and his job was to pay you as little as possible. He wasn’t your coach, your mentor, or your advocate. He was your boss. I’m not saying that was better, I’m just saying we all knew where we stood. Those employees almost certainly didn’t get upset with their manager at the end of the year when they didn’t get a pay increase, because they knew the manager had no intention of giving them one.

Today though, your modern is supposed to be looking out for you. We expect our managers to pay us fairly. We get to the end of the year and we expect them to give us pay rises based on our worth. We expect them to be our advocates. We walk into our pay reviews expecting our managers to reward us with a pay increase we didn’t ask for based on our performance and based on the fact we want our manager to be looking out for us. The pay rise is how they will show us that they appreciated all our hard work over the year.

But the managers are also working for the company, and the company expects them to keep costs down and to manage their budget. This conflict of interests has made every salary review process I’ve ever gone through frustrating.

I’ve lost count of the number of times I’ve given someone a pay increase, but I felt the need to apologise when I did it as I knew it wasn’t enough. The time and effort I used to put into working out how to use my budget the fairest way was immense, but no matter how hard I tried, every salary review period would leave some people disappointed, and I know a lot of the time that disappointment was directed at me. The fall out could often be long lasting or even permanent. Someone who had been trying really hard would get disheartened and stop putting in as much effort. Someone positive would turn into someone negative. Someone who used to trust me would stop trusting me.

Eventually I decided to change things up. I realised that one person could not be the representative of both the employee and the company. That’s like being a football player who has an agent employed by the club he plays for. The manager can’t be responsible for paying you more, and paying you less. The approach to the situation isn’t wrong, the situation itself is wrong.

So I decided to change the situation.

Bear with me on this. Every time I explain it the initial reaction people have it borderline horror. It sounds like it might be incredibly harsh. But it’s quite the opposite. When I started working this way all my employees were immediately much happier, and any issues relating to pay went away overnight.

Effectively, I quit one of the roles I was expected to perform. I no longer said i would act as an agent for my employees. I told me team that no matter what, I would never give them an unprompted pay increase. I explained that my job as a manager was to keep the salary costs down, so it would be a conflict of interest for me to represent them in that way. However, I also explained that I would always listen to someone who had a good case for getting a pay rise. I told them that I wanted them to earn a good salary, and that if they made a case for getting an increase that I agreed with, I’d do me best to secure it for them. But they would have to tell me. I would never instigate it.

And I never had another problem with employee pay again.

Even knowing what I know, when I explain it that way it doesn’t seem right. It seems far too simple and like it couldn’t really work. But here’s why it’s better for everyone.

It opens doors, it doesn’t close them

When you have a manager, and you think that manager is responsible for giving you a pay rise when you deserve one, you wait for them to give it to you. You don’t feel like you can just ask. If the manager doesn’t notice, doesn’t agree, or simply isn’t able to give you a raise for financial reasons, the conversation doesn’t happen. You wait and wait and wait, and you build up resentment, and you don’t get your increase.

If you know that the pay rise won’t come unless you do something, you don’t feel that way. You put your case together, and you come to the manager and make it. They can then agree or disagree, and either way the outcome is better.

If they disagree, the conversation has happened. When it was their responsibility to give you a pay rise, you were waiting for them to come and talk to you and getting more and more frustrated. But in that setup, the manager will only have the conversation with you if you are going to get the pay rise. They’re not going to randomly say “Hey, just so you know...I’m not going to pay you any more money today”. When it’s the managers responsibility, they have no way of knowing if you feel like you deserve a pay rise or not.

When it’s your responsibility, the conversation will always happen. If they didn’t notice, now they do and they can address it. If they didn’t agree, they can tell you why and you work on fixing those things so you can get it in the future. If they just aren’t able to, they can explain the situation and you know where you stand. No matter what the reality, the outcome is far far better when the person responsible for initiating a pay rise is the employee themselves.

It makes people consider their value

When your manager is responsible for giving you a raise, you really don’t have to think about your performance in detailed terms. You can just think “Yeah, I’m ace” and wait for them to realise to and give you all your money. But when you have to make the case yourself, you really have to think about the impact you make. You have to know what you can do that actually does add value, and you have to pay attention to your performance. It’s making you aware that you’re responsible for your performance, not your manager.

Every problem you have with pay reviews will now go away. You won’t ever have resentful employees who think you should have given them more, because you made it clear that unprompted pay increases aren’t how you show appreciation. Almost all the problems we encounter from staff in relation to pay are based on the money itself, they’re based on the fact we tacitly make them a promise we can’t keep. There’s an assumption that the manager is looking out for you when it comes to pay, and we can’t really do that. Not fully. We can try, but we always have the opposing interest to consider as well.

It saves you time

When you work this way, salary reviews take up almost none of your time. At the end of the year everyone knows nothing is going to change unless they have a conversation with you. You don’t have to prepare a review for everyone in your team, you can just have conversations with the people who have a case to make.

If you want to have a standard increase - let’s say everyone will increase 2% by default each year, you can make that the standard. Tell everyone “You’ll get 2% unless you make a case for more” and you’re done.

Working this way immediately stopped the uncomfortable salary conversation I used to have all the time, and any griping about salary stopped overnight. Most importantly, it treats people like adults. Salary reviews with a manager offering salary as reward are childish. We shouldn’t work this way. When you go to work you’re an adult who is responsible for negotiating your own reward. If I’m your manager, I’m the person you can negotiate with. You don’t need me to hold your hand.

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