Follow Up: Negotiating Pay at Review Time

Last week, we discussed tips for negotiating pay during the hiring process. Of course, the other main situation when you might have to think about negotiating salary is during performance reviews. Performance reviews are set aside to discuss how well an employee is doing his/her job, and it is the logical time for a savvy employee to want to turn their high marks into a raise. So, here are some tips for preparing for salary negotiations at a performance review.

First, establish a regular review cycle, if you haven’t already. Regular review cycles help reduce sporadic requests to negotiate pay, which can be bad news. Good salary negotiation requires that you be well-informed as to an employee’s value to the company and to the general labor market.

Regular review cycles also give you a good way to measure an employee’s progress and increased value to the company. When both employer and employee have a good benchmark for growth, it is easier to begin negotiating pay. When an employee earns exceptionally high marks in his/her review, it is time to think about a pay raise.

Of course, the tempting thing to do is to give the employee a terrible review. Then no raise, right? Just kidding. On the contrary, giving employees an honest and fair review helps establish a negotiating process based on performance management.

Consider setting 3-5 measurable goals at the end of each performance review. Decide on a timeline for attaining those goals, and an incentive (pay increase) that will be awarded when those goals are achieved. In doing this, you gain valuable growth and productivity from your employees. You are simplifying the negotiating process to an exchange of goods, rather than an exhaustive haggling process.

This is how salary negotiations would take place in an ideal world. But, you might be dealing with tough issues when it comes to pay at your company: salary inversion, pay freezes, even pay cuts. When the river of corporate wealth runs dry, the most important thing is to communicate early and openly about the issues at hand. Show employees the action plan for improving the situation, and encourage suggestions.

And, when it comes to sitting across the negotiating table from a disgruntled employee, consider other kinds of non-monetary compensation that you could offer. Maybe you can’t afford to give your employee a raise, but you can give him/her some extra vacation days. Maybe you can let a hard worker telecommute on Fridays.

What tips do you have for negotiating pay with employees? Leave a comment below, or send me a tweet: @ithinkther4iamb

IMAGE: Courtesy of Flickr by walknboston