I often get asked about how to go about giving raises.
My first response is “Why?”, something I normally don’t ask.
Remember that raises are “permanent” and affect many other elements of your practice, such as taxes, retirement plans, and more. An increase is wages is irreversible and should only be reserved for those team members that are performing exceptionally well consistently. What that means is that they are consistently going above and beyond what you hired them for in the first place, going beyond their job description and assignments.
I always offer pay increases to my team, and I tell them that I increase pay based on performance and not promise. I also use a form I developed (just email me for the form) called a Salary Conference Form, in which the team member fills out the information and schedules a time to meet with me. The form outlines three areas that would be considered for pay raises. These are:
- Increase the productivity and profitability of the practice
- Decrease the overhead of the practice
- Contribute in a tangible way to improve the image of the practice
Once they have completed the form, I meet with them to discuss their plans in any or all of these areas, then assist them in developing a plan to help them reach their goals. We also agree on a time to review their progress and results, and we also decide how much the pay raise would be.
Sounds good, right?
Generally speaking, most team members will not be willing to do what is necessary to deserve an increase in pay, but almost all think they deserve an increase in pay. For this reason, I use a Compensation Review form at the beginning of each year to review with them all of the costs to the practice associated with their employment, since most team members think that what they’re being paid is what they see on their paycheck after taxes have been taken out, which will be more this year.
Associated with this is the Cost of Living increase.
This is an increase that you must be careful with, as it is also permanent and can affect your bottom line in a significant way. If your practice is profitable and you feel you can afford this type of increase, then do it, but not by a percentage, since everyone’s percentage will be different. Pick a number, say $2000, and give each team member the same $2000 cost of living increase. You can avoid giving these type of increases for several years if your profitability is flat or declining, but you may have to eventually give some sort of cost of living increase. So, make sure you’re focused and making enough money each year to be able to do this!