What to Do When Your Employee Asks for a Raise

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For managers, being frugal is key.

Asking for a raise can be a nerve-racking situation on both ends: For the employee, you risk rejection. For the manager, you can get caught off guard.

"Compensation is one of the last areas on which the light of transparency is going to shine,” says Dick Grote, a performance management consultant and author.

Grote offers Money Talking host Charlie Herman five pieces of advice for how to correctly deal with an employee who is asking for more money.

1. Don't react right away. Grote says not to give an immediate "yes" or "no" answer. Instead, take time to consider the request, evaluate the employee's work and return with a considered counter-offer. If you give them what they ask for right away, Grote suggests that it sends a message to the rest of the employees that getting more money is easy. As a manger, that's not good.

2. Good news. If you offer your employee more cash, Grote says you should also ask them to take on more responsibility. This is your opportunity to get the most out of your employee while also making them feel recognized and appreciated.

3. Bad news. If you reject the request, make sure the employees knows that the decision isn't personal. Grote says that if you've taken the time to evaluate their work, and calculate their worth, you should feel comfortable sharing how you came to your decision.

4. What if they fight back? Grote says that if an employee gets upset and looks for a better offer somewhere else, that's not necessarily a bad thing. Especially if you, as a manager, have done your part to ensure that their current salary is fair, the employee might realize that they're doing pretty well where they are.

5. Other things to offer. Sometimes you're not in a position to offer your employee more money, but you can offer other things like perks, more responsibility and greater recognition. "It doesn't cost anything to pay more attention to an individual," Grote says.

If you've had an experience giving or getting a raise that went really well...or terribly wrong, tell us about it on Twitter or leave a comment below.