How to handle salary negotiations without having money in the bank

Like most people, I hate having to say “no.” At this point in my life it’s something I’m well acquainted with (having a daughter will help you get over that) but it’s still not fun to feel like the bubble buster. When someone comes to me looking for a yes and the answer I give isn’t what they want to hear, it sucks. Even still, sometimes “yes” just isn’t an option, such as when the question is “Can I have a raise?” and the reality is there’s no money in the bank, or the budget, to provide one.

The tough thing is, even when the money is just not there, salary negotiations are still an inevitable part of managing employees. Handling them with plenty of money in the budget is a difficult thing in and of itself, so handling them when a cut and dry “yes” isn’t an option makes it even more challenging. However, there are a few strategies you can utilize to avoid saying “no” when it’s important to retain employees or recruit new ones.

Get to the bottom of things

Understanding your employees is a vital part of being an effective HR manager. This is especially true when employees request raises or ask for more than you offer because at the surface it probably seems that the request is all about money. In all reality, there is probably a motivating factor behind the request. It may be that the employee feels under-valued, it may be that the employee is seeking more of a status with in the company or it may be that they have five children to clothe and feed. Everyone’s motivations are a little bit different but if you can pinpoint them, you’ll have a better strategy of how to handle not being able to say “yes.” For instance, a raise may not be an option but the status-seeker employee might be satisfied with a different title or better office in the meantime.

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Get creative

When salary isn’t negotiable, take a look at your total compensation and evaluate what else is. You likely have some other benefits you could increase or adjust or may have something you could add to the employee’s total compensation package. Perhaps you could offer an incentive bonus, extra vacation time or increased perks unique to your company. The main objective is to make the employee feel he or she is being heard and is valued by the organization. Tell the employee why a raise is not a possibility at the time but that you would like to increase another area of their total compensation because it’s important to you that they feel valued.

Be honest

When a yes just isn’t an option, honest employee communication is the best policy. Often employees will understand that the money just isn’t available at the time. On the other hand, employees will likely see through answers full of fluff and avoidance, so steer clear of putting off an answer inevitably or offering false hope. I have seen morale decrease quickly when managers make promises they can’t back up with actions. Even though offering tidbits of hope makes it easier on you now, it will hurt you in the future.


Talk about a timeline

It happens all the time: managers max out their compensation budgets early in the year and are left with months of salary negotiation vulnerability as they know they’ll have no cards to play until the next budget rolls around. When this happens, or when there are just no funds available at the time, talk to your raise-seeking employees about when a raise will be a possibility. If your company only gives raises annually, let them know. If it’s only a possibility after they reach a certain benchmark, communicate that fact. Often a realistic timeline will be motivation for employees to not only hold out for a raise but also kick their work into high gear. Once again, it’s important to not provide false hope or offer fictitious timelines but when timing is really the issue, a simple conversation may be all you need.

How do you handle tricky salary negotiations? Let us know in the comments section below.

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2 Comments on "How to handle salary negotiations without having money in the bank"

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James E. Turner, Sr.

Trying to make sure we are fair wirh our emplyees.

D. White
Often, employees are bored or feel they lack opportunities to improve or expand their skill sets. Education/training and job enrichment can solve these problems far better than elevating and distorting job titles, creating false perceptions and disruption among other employees who are doing the same work or are in the same pay grade. Inflating job titles is not a no-cost solution. It hurts the department and company far more than it helps. And it’s surprising how an elevated title meant only for a business card can leak to other employees and create havoc. If money truly is the only solution,… Read more »