How to Retain a Key Employee Threatening to Quit Over Salary Dispute?

Hi All, I have an employee who claims that his pay package is very low compared to market standards. I put his request across to the management regarding the pay hike. However, the request was declined, stating that this might motivate others to go ahead and ask for a salary hike. The issue is that this employee is a core resource and was hired on a lower package compared to his previous job. He is unwilling to accept anything other than a pay raise. Despite my efforts to convince him about company policies, other benefits, and promising to consider him in the next appraisal cycle, there has been no success. He threatens to quit if his salary is not increased, and the management is not willing to approve the hike.

Could you please assist me in finding a way out of this situation? I aim to retain him.

Thanks in anticipation,

Nischal Kumar

First, why was this employee hired on a lesser package? Is that because of your industry standards? Again, is your company an IT company? One thing about your management is correct; if you hike his salary as a retention tool, this may become a negotiation tool for your employees to hike their salary.

First, find out whether he has another offer. If so, ask him to share the opportunity details. Many employees will not accept this. However, you may still need to convince him that you will show this to the management and speak about his compensation appraisal. Apply a SWOT analysis about this employee leaving your organization. Share the same with your employer.

My brief advice is to have a skill matrix done and start de-risking your employees. Start from niche skills to vanilla skills.

Good luck!

Impact of Employee Resignation

Is his resignation going to have a significant impact in terms of replacement and other issues? If yes, then consider providing him with a separate allowance through voucher payments every month until the next company-wide revision for all your staff.

Regards,

Retaining an Employee Without a Salary Increase

How can you retain this employee without increasing his salary, especially when a pay hike is most important to him?

My opinion is that if management is not ready to increase his salary, showcasing other benefits is futile. If he stays because of these benefits, then I don't think his performance will improve.

With Regards,
Vineet Deshmukh

1. Go for a compensation survey study within the industry. Organizations should have their own standards in terms of the monetary part.

2. If management is ready to give him a handsome hike as per market standards in the upcoming appraisal, if possible, take written confirmation from the management and speak to him.

3. This situation will help you understand what is in the mind of the management.

4. If the organization gives nuts, they will get monkeys. Value those who really deserve it.

Regards,
Hemant

Considering a Promotion Based on Designation

Will he accept a promotion based on designation alone? Would it be feasible from your side?

Thank you.

It is unfair to deny the deserved. This is more so as you realized he was hired for lower pay. Pay for the product, especially at a time when he found his worth in the industry. You should be prepared to pay for the product you buy. Otherwise, prepare for the alternative(s).

Regards,
Kumar.S.

Dear Nischal, Unlike others who have provided you with solutions, I will raise questions for you to ponder over. Then, if possible, you can provide some answers. My questions are in blue after your statements underneath.

Some companies do allow such resources to go and then rehire them with a higher package at a higher level after a while.

Have a nice day.

Simhan

Employee Motivation and Retention Concerns

If the company is least concerned with the motivation of employees, why are you worried about the retention of employees?

I feel in a hypothetical situation, if the employee quits and the concerned department suffers, it is established that he is a good and retainable worker. It is evident from your post that he was working at a discount and is now asking for a hike, which seems to be normal as he might have better offers which he is seriously pursuing. As an HR professional, you have to redesign his salary package at an optimum level, or else you might end up losing him.

Handling Employee Pay Disputes

This is a very common problem faced by any HR professional. A consistent, prudent, and fair stance on all such situations will prove you to be a good HR.

Firstly, convince yourself about the employee's argument and demand. Only if you are convinced will you be able to present his case to management and may receive a positive response. Do not view this case as an individual issue; have an organization-wide perspective. Management expects you to be the HR of the entire organization and not of an individual. Your presentation to management should be for a set of employees and not for individuals.

Lastly, despite your best efforts, management may not agree with you. Never make any false promises or give false hope to the employee. Be very clear and transparent, and let the employee make his own decision.

In such situations, the only thing you can do is put in your fair and best efforts and forget about the outcome or results.

Hi All, I have an employee who claims that his pay package is very low compared to the market standards. I presented his request to the management regarding the pay hike. However, the request was declined, stating that this could motivate others to ask for a salary hike. The issue is that this resource is a core resource and was hired on a lower package than his previous job. This person is unwilling to accept anything other than a pay hike. I have tried convincing him about the company policies, other benefits, promising to consider him in the next appraisal cycle, but still, no luck. He threatens to quit if the salary is not raised, and the management is not prepared for the hike. Can you please help me find a way out of this situation? I want to retain him.

Thanks in anticipation,

Nischal Kumar

In my view, it is always better to retain talent than to consider any other options. Retaining talent is a complex issue that requires prudent experience. Ponder about it, talk to other seniors, and then take a stand.

Dear CiteHR members,

The same thing happened to me as I was not given my due appraisal despite promises from the management. It occurred for 2 years that I had great output at work, but still, I was never motivated or appreciated. In fact, juniors were hired at higher pay packages, and it was really disheartening that freshers were hired at higher pay packages. Why is it that hard work was not valued, and even asking for a hike called for criticism? In fact, I was willing to participate in activities enthusiastically but was demoralized by everyone.

Although my experience and work profile were good, new companies only hire for a minimal rise on the last pay package. How can I progress? How can I grow in monetary and knowledge terms? Please guide me.

Regards,
MK

This is a very common scenario. As an HR person, you must act immediately. Get permission from the management to terminate the employee promptly. Call him to your office and tell him that he is a valuable and essential part of the organization. It is also true that his salary is lower compared to the market rate.

However, the company has its own policies and procedures. It is challenging to adjust the salary of one employee, especially under the threat that he will quit if it is not done. Provide him with assurance that he will be appropriately compensated during the annual increment. His case will be considered a special one as well.

That being said, if he still insists on quitting, obtain his resignation immediately, accept it, and provide him with all end service benefits. Inform the concerned department about his departure. Ask them to handle the additional responsibilities until a new person is recruited on an emergency basis. Proceed with an immediate replacement.

Regards,
Baiju

First of all, when he was hired, you (the management) would have shown him the salary structure and compensation for the post, right? If he felt that his salary was low, he should have demanded more at the time of the interview itself. After accepting the offer and joining the organization and even working for some time, then he starts saying that his salary is lower than the market standard, means he is indecisive. Leave alone how important the role is.

Secondly, just because someone puts in his resignation, you should not increase his salary. As someone rightly put it, if you start doing so, everyone will start the same strategy of putting you a threat of resigning and then demanding more. There is no end to it.

What you should ideally do is try to understand the salary level of your industry. If you feel that you are paying a reasonably good salary, you need not worry.

These kinds of people (working only for money) will not look at other benefits such as the organization's background, growth opportunities for the organization and self in the long run, conducive work environment, freedom to make decisions, etc.

Even if you increase his salary, what is the guarantee that he will not still look for a job? If someone offers a better salary, he will still quit.

Therefore, try to talk to him and have patience until the next annual review. If he does not have patience, allow him to push off.

Regards,
Balaji

It's the duty of the management to think about the matter. If the employees are underpaid and looking for greener pastures, as an HR professional, you can't resolve it unless the organization's management steps in and decides on increments, hikes, etc. It's something like the management sets the rules of the game, and you play accordingly.

Regards,
Md. Mujahid

Conducting a Wage Survey

Kindly conduct a wage survey as you described regarding the market standards. Select some competitor companies and conduct the survey. Submit the results to your management regarding the current trend in salary increases. This will help facilitate a clearer discussion with your management.

Regards.

Ideally, I would have compared the salary standards and later asked the employee to aim for a higher designation with the expectation of a higher salary. Since the employee has already served the organization for a decent tenure, they would definitely be looking for growth along with a salary increase. The words used should be well-chosen and very clear.

Thanks & Regards,
Nalla Kishore
Team Lead HR

You know, no one is indispensable. When a king dies, the kingdom does not end with him—it goes on.

I think you have taken him from some company where his salary was low, and you have given him a raise accordingly. Maybe it is not as per the market trend, but it was one that he accepted. Why did he accept the same in the first place? Everyone feels that their salary is lower than either their colleagues or the market. You cannot please everyone. You should tell him that when the offer was made, why did he not raise his displeasure at the amount offered or tell you that the amount offered was lower than the market prevalent rates? If he did not make his point vocal at that time, he should give you time to make the correction. He cannot hold you at gunpoint. Tell him what he is doing is completely unethical and something that will not help him in his career path as sometime along the way these wrong moves do have a habit of catching up with you.

My advice to you is, tell him the above, and if he still wants to move, let him go; otherwise, he will create a lot of negativity around him which will cause more damage. I am speaking from experience. I had an identical case, although the person was not so critical as maybe in your case, but after putting things on the table, he realized that it was as much his fault because a company will always try to negotiate and get people at the best cost possible. However, in my case, the person stayed back, understanding what I told him, and I did respect his case and got the necessary correction done in the next financial year.

Regards,

You can give suspense pay in a way that suits his cadre in the organization. It should be confidential and convince the employee to keep it confidential.

Sathish Reddy P.

He might have accepted a lower package, keeping his previous salary in mind. However, his peers may be earning more, so it's better to settle this confidentially. First of all, you have to know that this is the era of employees.

Hi, you know, no one is indispensable. When a king dies, the kingdom does not end with him—it goes on. I think you hired him from a company where his salary was low, and you gave him a raise accordingly. Maybe it is not as per the market trend, but it was one that he accepted. Why did he accept it in the first place? Everyone feels that their salary is lower than either their colleagues or the market. You cannot please everyone. You should tell him that when the offer was made, he should have raised his displeasure at the amount offered or told you that it was lower than the market rates. If he did not make his point vocal at that time, he should give you time to make the correction. He cannot hold you at gunpoint. Tell him that what he is doing is completely unethical and will not help him in his career path, as these wrong moves tend to catch up with you. My advice is to tell him the above, and if he still wants to move, let him go; otherwise, he will create a lot of negativity around him, which will cause more damage. I am speaking from experience. I had an identical case, although the person was not as critical as in your case. After putting things on the table, he realized it was as much his fault because a company will always try to negotiate and get people at the best cost possible. However, in my case, the person stayed back, understanding what I told him, and I respected his case and got the necessary correction done in the next financial year.

Regards,
Sathish Reddy P.

Dear Mr. Buddy,

He might have accepted a lower package, keeping his salary at his old organization in mind. However, his colleagues in the same cadre may be earning more. Therefore, it would be better to handle this matter confidentially. Firstly, you need to understand that this is the era of employees.

Let it be so, what? In this case, the writer mentions that he is not comparing his salary with the current employees in the organization. He states that he is not receiving a salary according to the industry standards.

So, what if it is the employees' era? Are you implying that they will dictate terms to you, and you will continue to accommodate their salary increases?

There is no confidentiality in this. You need to be straightforward and transparent with employees. If the management continues to handle business in a hesitant manner like this, it will lead to trouble.

Regards,
Balaji

If the employee has potential and you consider him an asset, there is nothing wrong with negotiating a pay hike. There is no rule that the hike should be made in the next appraisal cycle. It can also be done in the interim, on a case-by-case basis.

Regards,
Pon

Evaluating Employee Pay Concerns as an HR Professional

First of all, as an HR professional, are you able to evaluate whether management is right in this situation or if the employee is? Do you believe that the employee is receiving a lower package in comparison to their performance and others' packages, or if all employees are receiving lower packages than market standards? Additionally, do you think this person could potentially receive a higher package if they were to quit and join another organization?

If the company is paying other employees more than this individual despite their good performance relative to others, then it is your responsibility to discuss this with management and bring their contributions to the company to their attention. Sometimes, employees may use this tactic when management or another authorized person has praised them, indicating that the company values their presence.

It does not imply that you should refrain from praising and motivating them. Rather, it is the HR's role to evaluate their work in a way that communicates that the company appreciates their performance as long as they are part of the organization and working for its benefit as a member. However, they cannot dictate terms to the company management.

Therefore, if an employee has the impression that the company will agree to their conditions, it may convey a message that they can exert control over management. However, if an employee is indeed being paid a lower package despite their exceptional contributions to the organization's welfare, management should recognize this and provide a reasonable raise. This is a situation that tests your true HR qualities as you will need to act as a bridge between management and the employee. Best of luck, and please do share the final outcomes.

Thanks and regards,

Renuka Prashar.

Hi Renuka, thank you very much for your help. I had the same thought in my mind wherein I did not want this guy to drive management at his will. The problem here is this guy was offered a hike based on his package from his last job, which was less. But here with us, he has evolved as a key resource and is now asking for a pay raise. I tried negotiating with the management about this issue, but the main worry is if this will send a wrong message to the rest of the folks in the team. I don't want any other fellow of the team to get inspired by this guy's hike. For now, I am planning to suggest his direct manager to start preparing for a backup. Please let me know if you have any other thoughts to retain this guy.

Thanks,
Nischal

First of all, please confirm whether the information about the guy being offered a raise from his previous job was provided by the individual himself or if you have verified it independently. There is a possibility that the person is simply exerting pressure on management by spreading rumors, so it would be prudent to verify this information at your level if possible.

Secondly, I suggest tailoring your approach to this individual based on his current mental state. Nischal, as you may agree, effective HRM involves understanding the psychology of individuals. People tend to be more receptive when information is presented in a way that aligns with their preferences. Therefore, if you can gauge his mental state, it may facilitate making decisions that he will be more likely to accept positively, ultimately aiding in retaining the employee.

The ability to assess the situation and make timely decisions rests in your hands.

In cases where the individual is making empty threats without substantial evidence, there may be no cause for concern as he may not actually intend to leave. However, if you believe that the employee's salary does not align with his performance, it is advisable to persist in advocating for a salary adjustment with the management, as this issue will likely not resolve itself in the long run.

I trust you apprehend my perspective. Additionally, should you require any further assistance, please do not hesitate to reach out.

Thank you and best regards,

Renuka Prashar

When an organization recruits an employee, the organization makes him an offer of employment, and only when the individual has accepted the offer does he join the company. So, today, if the employee feels that what he was offered in the past is less, he is also partly responsible for it. He cannot blame the organization. It is immaterial to think whether he was taken at a lower salary or not.

Appraisal Cycles and Salary Reconsideration

Now, any organization cannot randomly reconsider any employee's salary at any point in time of the financial year. If a company does this, it will be doing only this and nothing else. This is the reason why we have appraisal cycles. The organization considers the productivity of employees and gives them a salary hike during the appraisal cycle. Your employee must be mature enough to understand this, and you must convey it to him with conviction. Mr. Pon has suggested that there is no rule that you wait until the next cycle. If there is no such practice, the organization will suffer.

Business Continuity Planning

Now, no person is indispensable. The organization won't close down if one employee resigns. So get all your heads to have a proper business continuity plan. What would you do if this employee were sick and bedridden for a long period? Shouldn't you be prepared to run business as usual? So the leads should identify and train the second in line.

Employee Motivation and Appraisal

Now, having said that, it is also imperative for HR to make sure that the workforce is contented and motivated to work. So, if you see a need to increase the pay of this employee, and if it is in your power to assure a hike, give it to him in the next appraisal cycle. Show him what aspects of his performance have induced this hike and what you appreciate about his performance. Also, show him what you expect in his performance for the coming cycle.

DO keep the forum posted on the outcome.

Regards

Very simple. Please find out from his personnel file what his pay in the last organization was. Also, compare what his peers are getting in the organization. See if he is paid less than them. At least this differential can be met.

Now, as far as the question of 'this employee' getting paid lower than industry standards is concerned, you can actually do some research based on industry and type of experience. Also, try to line up a few candidates and see how much the replacement costs you. You will get a fair idea about industry norms.

Your employee might go job shopping and come back to the table with a new offer from another firm and bargain with you. You can share this with the management and let them make a decision because their actions will lead to an inflation in the salary bill.