How to Handle Raise Requests

The message pops up on an otherwise uneventful Thursday afternoon:

Do you have a second to chat about my salary?

As you read it, your stomach tightens slightly. You've been expecting this conversation, but that doesn't make it any easier. Raise requests are one of the most common—and most difficult—parts of running a business or leading a team.

Before we dig in, a heads-up: This is one of those annoying situations where I'm going to tell you a bunch of stuff you should've done before a raise request happens. But stick with me—we'll cover both what to do in the moment and how to be better prepared next time.

A challenging truth about compensation is that it rarely motivates employees.¹ Instead, it mostly demotivates. Get it wrong, and it breeds resentment. Get it right, and it mostly goes unnoticed. This is what psychologist Frederick Herzberg called a "hygiene factor"—pay alone won’t inspire performance, but bad pay practices will drive people away.

In other words, money is rarely just about money. Most raise requests are actually about recognition, career progression, or role clarity disguised as a compensation discussion. Your job isn't just to say yes or no to a number—it's to uncover what's really driving the request.

You also need to recognize the weight of this moment. When an employee asks for a raise, they've probably been thinking about it for months. They've gathered their courage and chosen their moment. Your first move should be to slow things down—not to delay, but to turn this into a real conversation. Schedule a meeting within 2-3 days. This gives you time to prepare and shows them you’re taking it seriously.

When you meet, start by asking, "Help me understand what's changed that made you think about compensation now?" Then listen. Really listen. The answer will tell you whether this is about market rates, increased responsibility, performance recognition, or something else entirely. Before you start running numbers, you need to understand what's really driving the request.

Sometimes they'll cite personal needs here. A new mortgage, a growing family, an unemployed spouse. Empathize, but don’t get trapped in that conversation. Compensation follows value creation, not life circumstances. For these scenarios, show them what development paths would earn them more money.

Once you understand their perspective, be transparent about your next steps. If you need to research market rates or review their recent contributions, say so. Most employees respect a response like, "I want to give this the thought it deserves. I'll gather some information and we can meet again next week." Just don't let the process drag on—aim to have a clear answer within two weeks.

When you don't have the authority to make compensation decisions, transparency is even more critical. Be upfront: "I can advocate for you, but final compensation decisions are made at a different level. Here's how the process works..." Then explain exactly what you'll do next—whether that's taking their case to your manager, involving HR, or working through a formal review process. Clarifying your role and the process protects both you and them from misunderstandings.

Once you’ve listened, gathered the right information, and weighed your options—make the call. If it’s a yes, communicate it clearly along with why. If it’s a no, explain what would need to change for a raise to happen. Either way, don’t leave things vague.

And if you want fewer of these tough, one-off conversations, you need a system that makes compensation decisions easier and more predictable.

Here's how to start:

Document your current compensation philosophy. If you can't articulate why you pay what you pay, you need to figure that out before handling individual requests. Start by answering basic questions: Do you aim to pay at market rate? Above? Below but with better benefits? Are you trading cash for equity? How do you factor in location, experience, and specialized skills? Your compensation philosophy should be simple enough to explain in a few sentences but comprehensive enough to guide consistent decisions.

You might be surprised, but businesses with the fewest compensation issues often pay slightly below market rate—they’re just crystal clear about what they do offer and why. They've made intentional choices about their positioning in the talent market and they communicate this consistently to their team.

Create clear bands for each role. Establish specific criteria that define both the requirements for each band and what it takes to advance. This transforms raise discussions from emotional negotiations into objective conversations about meeting criteria. For instance, each engineering level might have clear markers for progression: technical skill benchmarks, project leadership capabilities, and mentoring responsibilities. When someone asks for a raise, the conversation becomes, "Let's look at where you are against these criteria" rather than a back-and-forth negotiation.

Conduct regular market rate reviews. Don't wait until someone threatens to leave to understand competitive pay. Schedule checks of salary data a couple times a year² , talk with peers in your industry, and do your best to track what your competitors are offering. This research becomes your foundation for both proactive adjustments and confident responses when employees raise market-based concerns.

Set regular compensation review windows. Typically annual or semi-annual. These structured timeframes let you batch decisions for consistency across the organization and align with your planning cycles, letting you make informed decisions based on company performance and forecasts. This doesn't mean you can never give raises outside these windows, but it sets clear expectations about when these discussions should happen.

A structured system doesn’t just make your life easier—it keeps employees from feeling like they have to corner you to get a raise. When people know how and when pay decisions happen, there’s less tension, less guesswork, and fewer awkward conversations.

Building something like this might feel overwhelming when you’re staring at a message from an employee who wants to talk about pay right now, but knowing where you need to go will help you handle the conversation with confidence. Let this moment be the catalyst for building a better compensation system.

(A note for smaller teams: If you're running a five-person business, you don't need all the bells and whistles we just discussed. But you do need something more thoughtful than figuring it out on the fly each time. Start small—maybe just write down your basic philosophy about pay and rough guidelines for different roles. You can build out fancier systems as you grow.)

The goal isn’t to avoid raises—it’s to make pay fair, clear, and tied to results. Get this right, and you'll spend less time handling raise requests and more time growing your business.

1  Salespeople argue this the most, but inject them with truth serum and you’ll find they care as much about the scoreboard and the “glory” as they do the commission check.

2  There are all kinds of inexpensive tools that make this quite easy.