Giving employees a raise increases their job satisfaction, morale, productivity and motivation, which helps your business work toward achieving its long-term goals. Satisfied team members help your small business avoid frequent staff turnover costs. You will develop a reputation for valuing employees, making it easier to attract talented individuals. Small business owners should be aware of times when it is appropriate to issue a raise.
At an Annual Review
Consider giving your employees raises at their annual performance reviews. This allows you to asses if employees have been strong contributors, if they have accepted additional responsibilities and how they have achieved their yearly goals. For example, if you own a small accounting business, you could issue a raise to employees who achieved a goal of growing their client base by 20 percent. Motivation is high after a raise; it provides an excellent opportunity to have a discussion with employees about what your business is anticipating to achieve, and how they can become more involved. Use the annual review to ask employees for feedback and suggestions where they think improvements to your business could be made.
When Your Small Business is Experiencing Growth
You could give employees a raise when your small business is going through a growth phase. Issuing a raise communicates that you are aware of your employees’ increased responsibilities and additional hours they are working to help grow your business. For example, if you are a product seller, you could give a raise to your marketing team member who has been working on weekends to help launch your products into a new market. Employees who feel valued are more likely to show loyalty to your small business, helping make them easier to retain. Experienced team members are crucial for helping train new employees through periods of growth.
With a Promotion
A promotion is an ideal time to give employees a pay raise. A raise acknowledges the greater level of responsibility and expectations of increased productivity your business is giving the employee. For example, if you own a small financial services business, you could give a broker a promotion to service wholesale clients. Consider raising the broker’s base retainer or increasing the broker’s commission to accompany the promotion. Ensure your team members are aware that you issue a raise with promotions to encourage employees to push themselves to the next level, helping establish a culture of achievement.
When Your Team Helps Achieve a Major Business Goal
Give each team member a raise upon achieving a significant business goal. For example, if you have a small management consulting business and achieve your business goal of generating $500,000 in revenue, reward each team member with a raise to show your appreciation. Rewarding your entire team promotes collaboration and teamwork to help achieve future goals. Team members will be more likely to assist peers who are struggling and need encouragement to complete projects and tasks, so the team receives the raise. It also stops employees from thinking you favour particular team members.