An employee may ask for or expect a pay increase because she feels she deserves it or because she needs more money. As a manager, you should assign pay raises only to employees who earned them. You would decline an increase if the employee fails to meet company standards. In some cases, denying an increase has nothing to do with the employee’s performance.

Reasons

Besides an employee not deserving a raise, you might deny a salary increase because the company is on a tight budget or because the employee is being paid at his current market worth. During the performance review meeting, you must tell the employee why he is not getting a raise. State the reason on his review paperwork, which will go in his personnel file.

Supporting Documents

A few days before the review, give the employee a self-evaluation form to complete. This will give you an overall picture of how the employee views her own performance versus your take on it. The self-evaluation can remind you of her achievements that you might have forgotten. It also gives you time to address discrepancies in the employee’s expectations and helps you to make a fair decision. If the employee submitted a standard salary increase request form, review supporting documents she attached, such as a copy of her present or past performance programs.

Performance Review

To justify declining an increase because the employee performed below company standards, carefully review his job description. The description should include his exact duties, how the work should be done, the purpose of the job and the qualifications needed for the job. Record areas that the employee performed according to company standards and areas he fell short. Be specific and state the effect of his unsatisfactory performance on the company. For example, you might write that his inability to meet deadlines resulted in his coworkers picking up the slack. Prepare a draft that you will use to explain to him why you denied the raise.

Review Rating

Grade the employee honestly on the evaluation form according to the company’s rating system. For example, below average might mean she fulfilled most of the minimum job requirements but needs some improvement. Unsatisfactory may indicate that she needs to improve immediately to keep working for the company. Your rating helps to justify why the employee does not deserve a raise. Prepare an action plan with a timeline for improvement.

Evaluation Meeting

Maintain a positive and objective demeanor when explaining why you are denying the raise. If the company cannot afford it, say so. Reassure the employee that you are satisfied with his work and that, once things improve financially, he will receive an increase. You might consider giving him a small performance bonus instead. If he is already receiving his current market worth, find out how much more work he is willing to shoulder to justify the raise. If he does not deserve a raise, refer to your draft and explain how he has not met company standards. Explain that receiving an increase is ultimately up to him and that he has to earn it. Give him the action plan, offer developmental resources such as additional training and keep an open-door policy so he knows you are there to help. Explain the consequences if he fails to improve.