By Sandy Bundy, HR Professional

You have some great employees at your business and you’re wondering what to do about their compensation. You think you should be giving raises (or at least they think you should be) and you want to know what to do.

This is a point where a little structure can help. Many business owners choose to set a specific time when they look at an employee’s wage. Often that’s at the employee’s six-month or one-year anniversary. (You can mark these dates as a reminder on your calendar when you hire the person.) Some businesses choose to look at everyone’s wages on the same date and give raises all at the same time. Whatever you choose, you need to review the financial impact on your business.

• Say you hire someone at $6.90/hour. You could set up a schedule of rate increases that give small bumps in wage (at 3 months or 6 months, 1 year and annually or semi-annually thereafter). Small bumps can be in either a percentage or in cents-per-hour. For example: 1.4% or 10¢.
• If you hire someone at $6.90/hour and you wish to wait and give a rate increase after one year, the percentage will be higher. For example: 3.5%/25¢ per hour or 5%/35¢ per hour.

What factors should you consider in evaluating an employee for a raise? You want to look at how well he or she is doing the job. If you have a highly versatile employee who’s accurate in her work, friendly and popular with the customers, and willing to help out wherever you need it, then you can pay her more than your other employees. If you have an employee whose performance has been average (but not great), you can hold off on giving her a rate increase. Always be sure to let employees know why you are holding off.

Timely rate increases will increase the morale of your employees. We all like to know where we stand with our employers and most of us feel our employers show their appreciation through our compensation.

What if times are tough and you can’t give raises this year? Let the employees know that and show your appreciation in other ways. Maybe you can afford to provide them with some other incentives: an extra employee discount, a monetary bonus or a paid day off. Help your employees understand how they can help restore your business to profitability. Regardless of whether or not you can afford to give rate increases, always give your employees verbal feedback about how well they are doing and how much you appreciate them. Open communication is always your best support!