Can you afford to?
Do you have it to give? If the answer is “no,” then there’s not much else to think about. However, if this employee is one of your best, you might want to offer something of value in lieu of the cash you don’t have at the moment. Can you provide a more flexible schedule or more vacation? Does it make sense to agree to defer a raise for a few months until you can afford it?
Is the employee worth it?
Is this employee a top performer? If so, it’d be a shame to not reward him as such. And remember, when it comes to talent, you’re not only evaluating what the employee has done but how much you expect the employee could do. In other words, what’s the employee’s potential for future contributions? If the answer is “pretty high,” than you’d do well to at least consider the request for a raise.
Where does the employee’s pay stack up against her peers?
HR has a bad reputation for recommending that all employees be treated the same, but I’m not sure this reputation is deserved. Any decent HR pro will recommend that employees be treated (i.e., compensated) in accordance with their merits. There’s nothing wrong with paying an employee more if she gives the organization more.
That said, before you go ahead and red circle that employee by paying her above the pay range maximum, be sure you can justify your action in writing (should the decision ever be challenged) and that you have a plan for managing costs down the road.
And by the way, if the employee is being paid on the low end relative to other employees doing similar work, then by all means, correct that state of affairs pronto before you have an entirely different problem on your hands. (One that, say, involves the EEO or the Department of Labor.)
Related: How to Perform Compensation Benchmarking and Set Salary Ranges
How easy or difficult would it be to replace this employee?
I always say that while employees aren’t expendable, they aren’t irreplaceable, either. However, some employees are harder to replace than others, especially for the savvy employer who recognizes the real value smart and talented employees bring to the organization. What about this employee now requesting a raise? How difficult would it be to find someone else with his knowledge (including institutional knowledge), skills, and abilities? What about work ethic and work attitude? According to an article published by the Center for American Progress, replacing an employee making $30,000 or more—any employee making $30,000 or more—costs on average 20% of the employee’s annual wages. Before deciding that an employee can just hightail it if she’s unhappy with her rate, consider all the costs of saying no to a raise.
It’s been said before, and it’ll be said again—talented employees are always in demand. When one of your employees requests a raise, then, it’s always a good idea to hear him out before saying yay or nay.