Modern employment is simple. Show up, add value, and get paid for something relatively close to that value. Easy, right?
Yet, year after year, friction can develop as your team expects standard raises each time they metaphorically "pass GO." So, how do you keep your team happy, without breaking the bank from obligatory annual raises?
At Trainual, we do one-on-one check-ins every 90 days with each employee to talk about how he or she feels and fits in with the company. And one hot topic we don't shy away from is compensation. Money is one of the top reasons employees leave jobs, so we have created a culture that allows for comfortable and ongoing conversation about pay.
If you're wondering if it's time to give one of your employees a raise, here are a few reasons to adjust an employee's compensation that aren't based on tenure.
Give raises for more responsibility.
As your company grows, roles and responsibilities change constantly. Early employees in particular are revered for taking on a little bit of everything. But, when that turns into a lot of everything, it's time to recognize the new workload.
When our customer success manager started training new hires, we had to re-engineer her position, and her compensation. Be sure to pay for all of the tasks that your superstars are tackling, not just the initial set that they were handed on day one.
Give raises for more autonomy.
When someone first starts with you, he or she might require a bit more management. In the early days of a new job, there can be a learning curve that requires more oversight -- read "more time" -- from the manager. That time has a cost.
But as the employee gets more comfortable and more confident repeating daily work, you can look over her shoulder a little less. She becomes more autonomous, and thus more valuable.
In the past, I've anticipated this increase in autonomy with "planned raises" that are three to 12 months from the date of hire. It's a great tool to use during a negotiation, when a new hire wants to make more, and you're confident that this person will be worth more with six months of experience inside your company. Planning raises can push the compensation conversations further out, because there is already a performance plan in place to reach a new goal.
Give raises for more efficiency.
Can your employee now produce the same asset in half the time it used to take him? Similar to autonomy, employees who can work more efficiently can take on more capacity -- and that means more work is getting done for you.
While an employee might be doing the same thing as before, he can complete tasks in half the time, allowing him to move to the next project more quickly. Once your employees can operate more quickly than they could six months ago, it might be time to reward them for their hard work with some extra dough.
Give raises to keep up with the market.
If your business is expanding and you have to hire more of the same position to keep up, it's not likely that what you offered someone three years ago is going to be the same as what you offer for that same position today. If the going rate for the position then was $60,000 and today it's closer to $80,ooo, it might be a good opportunity to bring your current employee up to market value.
Ask other business owner friends what they pay for certain roles. Join a mastermind group in which you can have these types of confidential conversations. Or, use simple tools like Salary.com, Glassdoor, or Indeed to ballpark the salary bands for your area.
A quick note on cost of living.
Inflation isn't imaginary, but it should be irrelevant.
Let's say annual inflation is 2 percent. Instead of giving a "cost of living raise," aim to increase responsibility, autonomy, or efficiency by far more than 2 percent, and give fair raises for the increased performance.
Raises should be mutually beneficial.
Your good employees will leave if they feel they're not compensated fairly or recognized for their hard work. Recognition doesn't always have to be in the form of cold, hard cash -- extra PTO, benefits, stock options, and flexible schedules can often do the job. But creating a culture where good employees leave because of money alone can be problematic for the future of your business.
Treat your employees well and they'll work harder for you. They'll stick around, be ambassadors for your company, and genuinely enjoy working for you.