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8 Factors to Decide Who to Give a Raise in Your Small Business

Deciding on a raise is a very difficult process for business owners and managers. The limited funds in your small businesses are insufficient to satisfy every employee with an increment. Therefore, you need the right method to decide the raise for each employee in your business.

Performance-based raise is the common tactic businesses try to use to find the solution for the appraisal problem. But you cannot determine the performance of an employee without considering the different factors. The scope of assessment should include multiple parameters based on their roles and responsibilities.

Why a Raise Is Important for Your Business?

You need to give employees a raise to keep them with the organisation for a very long time. It makes no sense to expect the hard-working members of your team to perform the same without a reward. The incentives will serve the purpose, but they will not reflect growth in their career graph.

A raise will motivate the employees to put more effort into the work. The process also inspires other employees in the organisation to improve their performance. You can take loans without a guarantor to manage the increased cost because of the raise amid financial troubles.

How to Decide the Employees for a Raise?

The critical problem that arises is the list of employees who get a raise based on their performance. You cannot afford to create ill-judgement as the other employees will feel neglected. Here are some factors to consider before handing raise to your employees.

  1. Create a Pay Scale

It would be best if you create a pay scale for your employees, keeping in mind important factors such as quality, experience, and soft skills. Set levels for them and add them to a pay group to avoid any confusion. The raise will depend on these levels and change in the key factors.

You may face trouble trying to put the employees in a salary bracket with predetermined maximum and minimum compensation. But it will help clear any misunderstanding or doubt over their appraisal. Employees will understand your decision based on their profile and self-assessment.

  1. Focus on Quality

Employers should focus on the quality of work over the other factors while trying to find the top performers. It is among the key factors that will drive more sales to your business. Customers will prefer quality over experience or quantity any day to decide the service provider.

The worth of an employee depends on their available replacement in the organisation. You will find the more prominent organisations are willing to pay a heavy amount for quality because it is hard to replace. You should invest in the best talent even if it requires you to take out long term loans for bad credit.

  1. Promote Leadership Skills

Small businesses rarely have a different team of leaders to manage different tasks. They rely on the employees to take charge during difficult situations. Therefore, you must promote leadership skills in the organisation for the mutual benefit of your business and employees.

Take their initiatives into consideration while trying to measure the overall performance. It will help if you reward them for the responsibilities they are willing to take outside their job description. They also provide valuable input and creative ideas during the meeting to help find practical solutions.

  1. Set Expectations

The employees should have a goal in mind to help them perform raise-worthy. They will put those extra hours in the office if they are aware of the reward. Therefore, you should set expectations for them to help them give a better performance for the company.

Make sure to communicate the expectations with no vague descriptions. You should not set unreasonable expectations to make them more productive. It may result in a lack of motivation because of a certain failure while trying to achieve those impossible goals.

  1. Use Client Feedback

The client’s feedback is extremely important for the business to survive in a competitive environment. You will lose clients if that feedback ends up in a trash can with no consideration. The feedback about employees is a great way to measure their quality of work.

It will improve accountability in the workspace to make the employees responsible for their actions. They will start to avoid the mistakes since they are now aware of the consequences. Let the negative reviews reflect in their assessment to help them improve as a professional.

The positive reviews should get reward with additional points in the performance assessment. The consistent positive reviews will have a positive impact on the brand reputation. It will result in more customer retention to save money to drive a sale.

  1. Check Industry Standards and Performance Value

The standard rate for services in an industry will determine the amount of raise. You will lose the good talent to the more prominent competitors because of their heavy packages. Therefore, try to match the industry standards while providing raise to your employees.

Furthermore, you should find a value of their performance for the business to determine their pay. Every employee contributes to the growth and revenue of your organisation. The value of this contribution should help in determining whether the raise is feasible for the organisation.

  1. Consider Change in Responsibilities

The change in responsibilities is a common occurrence in the professional world with no formal communication. Employees take the initiative to manage a job more significant than their pay scale for a short duration. And the leaders often find them the perfect fit for those responsibilities.

It would be best if you consider these changes in the responsibilities while handing the raise to your employees. They deserve the raise, promotion, or bonuses based on the passion they show for the industry. While other employees who end up meeting the expectations only should get, baseline raises.


In the end, your decision will have an impact on the finances of your company and its culture. You need to find the strategy where the employees understand the reason for your decisions. Transparency is critical to creating a positive environment in the workspace with trust between the management and employees.

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