Understanding how managers approach pay increases can give valuable insights into what drives compensation decisions. Here’s a breakdown:

1. Performance Drives Pay

Poor results: No pay increase.
Good results: Eligible for a raise.
Top results: Priority for retention and better compensation.

Performance is the key factor. Consistently delivering results opens the door to pay increases, while excelling makes you a retention priority for the company.

2. Motivation vs. Resources

Managers are motivated to reward high-performing employees with better pay—it boosts morale, retention, and results. However, they also face the reality of limited resources, which often forces them to make tough decisions about where those funds go.

So it’s not that managers don’t want to increase wages. Constantly increasing wages for all employees would make life so much easier for a manager in terms of motivation, but that is just not possible or sustainable (even if the company was recently highly profitable).

3. Special Roles vs. Standard Roles

For specialized positions, like project managers or technical roles, the market dictates the pay. These roles require competitive offers to attract the right talent.

In contrast, standard roles within a department (e.g., customer service, operations) often follow a pay structure based on seniority levels—junior, standard, senior, and expert/mentor. But remember, seniority isn’t just about time spent in the role; it’s about your contributions, results, and added value. Simply staying in a position longer won’t guarantee a pay increase without meaningful contributions.

4. Personal Conditions that Impact Pay

Inflation and Life Events: Returning from maternity leave during a period of high inflation or dealing with unexpected personal expenses (e.g. medical bills) can make a pay increase essential just to maintain your standard of living. Managers may consider these factors when reviewing pay.

Personal Professional Development: Gaining specialized skills that benefit the team can significantly boost your chances for a raise. Retaining crucial, hard-to-teach knowledge also puts you in a strong position for pay negotiations.

Try to get into process automation or AI to future proof your skills.

Loyalty and Offers from Competitors: Long-term employees with proven results are often prioritized for pay increases. Additionally, receiving a better offer from another company can trigger a counteroffer, leading to a raise to retain you.

5. Organizational Structure and Limits

Your pay potential is closely tied to the company’s willingness to pay for your role. For example, imagine you own a very small company and you employ a social media manager. Would you set a specific wage range for that role?

As your skills and experience grow, your needs might outpace what the company is able to offer for that role.

6. Budget Constraints and Context

Budgets are often tight, meaning raises might be distributed in small percentages across the team, or higher percentages may be given to a select few. From a business perspective, a raise is usually justified only if the employee’s productivity, sales, or cost-saving contributions increase. Alternatively, if the cost of replacing you would be higher than retaining you, that can also influence pay decisions.

While retention is often more cost-effective than recruiting, turnover is expected in every business. If your team has a high retention rate and you consistently deliver results, your chances for a pay increase improve.

Best Actions to Increase Your Chances for a Pay Rise

• Consistently deliver top results.
• Look for opportunities to add value to the team.
• Develop rare and valuable skills that benefit your department.
• Have an open discussion with your manager about your contributions and needs, and how you can help drive the team’s success.

By understanding these managerial considerations and aligning your efforts with them, you can better position yourself for a well-deserved pay increase.