Welcome to the April edition of the HRLegal Newsletter. This monthly collection of focused features seeks to keep readers abreast of all updates in the quickly developing world of human resources and employment law. As we enter a new world and way of working, HRLegal is at hand for all advice in relation to all things people and HR. Our responsive and personable team of experts are available by phone, email and via our social media channels for any support they can provide.
Read on for explainers and features compiled by our experts, Una Clifford, Bláthnaid Evans and James Condon. For more on how we can assist your business, visit www.hrlegal.ie.
Money, Money, Money – how to navigate requests for pay increases and bonuses
James Condon, HR Business Partner
In this edition of the HRLegal Newsletter, we are expanding on one of our recent social media posts which provided some tips on how businesses can manage employee requests for salary increases or bonus payments. HRLegal has seen a major increase in clients looking for advice on how to deal with salary increase requests from staff. Navigating these conversations can be extremely tricky and approaching them in the wrong way can a have a major impact on staff morale and can increase the number of ‘flight risks’ within the business.
Requests are on the rise
With major global economic uncertainty stemming from events such as the war in Ukraine, along with inflation in the Irish economy which could peak at 8.5% this summer before averaging out at 6.7% for the year requests for salary increases are mounting. This level of inflation has not been seen in Ireland since the 1980’s and is certainly going to put a major squeeze on employees and their families. Recent research by the Economic and Social Research Institute (ESRI) warned that the impact of rising costs will see incomes fall by an average of 2% this year alone. Employees as a result are looking to their employer to help with mitigating this impact by applying salary increases or looking at bonus payments. Interestingly, the Central Bank has warned against salary increases across the economy to keep up with soaring consumer prices as they may result in a longer period of higher inflation. These requests from employees are coming at a very difficult time for many businesses who are only now starting to rebound from the impact of Covid-19 and are also dealing with rising costs of logistics, materials and supplies in many cases. HRLegal has seen however that clients who manage these difficult conversations successfully take a very empathetic but rational approach when speaking with their employees.
Prepare for the conversation
The most difficult stage of dealing with a salary increase request is having the conversation with the employee. HRLegal always advises its clients to ensure managers are prepared for such conversations and take some time in advance of meeting the employee. Once a request is received from an employee, it is vitally important that the employer/manager considers several factors before responding. HRLegal has seen businesses in the past provide a very blunt response to employees and we are yet to see this being the right course of action. Taking some time before providing a response allows the business to consider the request, assess whether it is viable and also allows scope to consider alternatives. Employees will generally be much more responsive and understanding once they understand that their request was taken seriously and given the due respect it deserves.
Manage the conversation
Managing the conversation with an employee can be done very easily once the manager understands that there are three key elements. Firstly, the manager should show understanding and empathy towards the employee. Many employees find approaching conversations on compensation very difficult and awkward. Managers who put the employee at ease and understand the difficulties of the employee will generally have more success in navigating these conversations. While a manager may not agree with the employee’s justification for a pay increase, remaining respectful and empathetic will go a long way to maintaining a good working relationship whatever the outcome.
A second key element for managing these difficult conversations is context. Context is hugely important as it will guide the direction of the discussion. A manager who understands and provides context to an employee will be much more successful. Providing an employee with context as to why they may not be provided with an increase or why they are getting less then they asked for, will help to soften the blow in most cases. In our experience, employees are much more likely to accept a negative outcome when they are provided with an understanding of why it may not be possible at this time. The explanation does not need to provide intricate details of the business financials or performance indicators but should be able to provide the employee with enough understanding to justify the decision. A very important tip however is to ensure the information you are providing is genuine.
Lastly, HRLegal would always advise our clients to consider the alternatives available to them. In many cases, there is an alternative to just declining a salary increase request. While the request may not be viable now, could the business propose a ‘bridging’ plan that provides the employee with enough reassurance to remain in their position while allowing time for the business to prepare for the additional costs. Additionally, the use of one-time bonus payments and/or inflation increases has increased, and both can be useful measures when used correctly. Bonus payments can a very useful tool but their structure and the communication around them requires a lot of consideration.
Have the conversation
HRLegal always advises its clients to at least have the conversation with its employees. Businesses can sometimes feel it is easier to ignore salary increase requests or provide a very direct one size fits all response in the form of an email to all of its staff outlining its position. Don’t put off the discussion as the employment market is too hot and any employee who is experiencing uncertainty is more liable to move if they don’t have clarity on the year to come. Taking the time to personalise a response to a request will have a much better outcome in the long run.
If your business is looking for advice around compensation discussions or would like to discuss any of the items mentioned, please visit www.hrlegal.ie
Social media is a great way for HRLegal to engage with HR-related conversations globally and brief our followers with explainers on the more perplexing, intriguing, or newsworthy issues on the topic. Have a look at some of our latest social media updates:
Charitable endeavours in the workplace can often seem to cynics like a box-ticking exercise – but such exercises can benefit businesses too. HRLegal explained on LinkedIn this month how Corporate Social Responsibility (CSR) activities can improve retention in your team – read on, here.
What would you do if a great staff member tendered their resignation? Often, team leaders resort to offering leaving employees more money to stay. However, there are more ways to look at tendered resignations. Read our advice on what to consider when a good staff member tenders their resignation, here.
Never let anyone tell you that an old dog can’t learn new tricks. Remember to contact HRLegal experts for advice in upskilling your team!
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- HRLegal Newsletter April 2022: Money, Money, Money! Navigating requests for pay increases/bonuses