Professional Guidelines for Effectively Communicating Your Decision to Decline a Pay Raise

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Asking you for a raise is not enough. Your employee needs to put their request in writing and justify it. They need a solid reason for requesting a wage increase. Ideally, make this part of your organization’s professional guidelines. 

When there is no particular reason, they might decide not to ask, deeming the process too much of a hassle. If this happens, it resolves the issue before it becomes one. 

Professional Guidelines for Effectively Communicating Your Decision to Decline a Pay Raise

Respond in writing  

Likewise, respond to a written pay raise request in writing. Taking the time to write a letter to the employee is not only professional but can also help them feel appreciated.  

What’s more, a detailed letter will present the steps forward. This makes sure the plan is well-documented and fixed for the future and can help encourage employee retention. According to a 2024 report, 70% of staff would leave their current job for a better-paying one, which shows how important fair compensation is in terms of retaining employees.

Justify your refusal 

Your company might not be in the financial position to offer pay raises, or the employee’s performance might not warrant one. An hourly payroll calculator will help you determine if you can afford a pay raise. It is a simple yet effective tool that calculates regular earnings over separate pay periods. It determines the total earnings based on hours worked and hourly rates depending on whether employees are paid once a week, twice a week, or once a month. 

If it emerges you can’t afford to increase their wage, give them an indication as to when the company will be in a better position or offer an alternative. 

A recent report found that 96% of employees want to change jobs in 2023. Most job seekers – 88% – consider health benefits as part of their search, including dental and vision insurance. The workforce also values businesses with employee wellness programs in place. 61% of respondents in the survey said these were important to them. You might consider offering them as alternatives to higher pay. 

Letter templates 

If the rejection is due to business operating reasons, write something along the following lines:

Dear [Employee’s First Name],

Given the economic situation and its continuing impact on the company, we cannot accommodate a pay increase at this time. If the environment improves, we will consider increasing wages during the next performance review cycle in [name of month].

We would like to talk about other forms of compensation to show our appreciation of your work, such as additional paid leave or [more] flexible working hours. 


[Your name/name of manager]

A 2023 report found that 95% of employees cared more about flexible hours than the opportunity to work remotely. Another recent report found that 84% of corporate workers wanted some flexibility, compared to just 16% who would rather have a fixed schedule. 

Your rejection can be performance-based if they don’t have any new responsibilities or their job role hasn’t changed. In this case, the letter can be as follows:  

Dear [Employee’s First Name], 

Unfortunately, the company cannot provide a wage increase based on current performance reviews. We will continue to help you improve your performance in leadership, communication, etc., until the next performance review cycle in [name of month.]

Final thoughts 

While compensation is not a top priority, by and large, a recent poll found 64% of job seekers did put it at the top of their list. Managers should be open and honest with their employees instead of skirting the issue of pay raises in line with more responsibilities or tenure. Transparent wage policies help build employee loyalty by creating trust in management, which results in improved retention rates.

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