By Kristina Schneider, Practice Success Coach
If you’ve ever had an employee approach you randomly and request an increase in their salary, it may be challenging to know how best to respond. While you may be happy with their work, you may be strapped from being able to financially accommodate such a raise. It creates all sorts of fears and concerns around this person walking away if you don’t oblige.
Below are some practical tips to help you manage (and avoid) this happening.
TIP #1: Create a Process for How and When You Review Compensation.
First and foremost, by creating a process and protocol for how and when you will review compensation, you can help avoid the unexpected blindsiding of an employee requesting a raise. We annually review compensation along with a performance review in January to kick off the year. We do all employees at the same time so that we avoid having to have random performance reviews and compensation adjustments. Further, this January employee review also allows us to anticipate budget adjustments and create new firm budgets and adjusted revenue goals accordingly.
TIP #2: Determine If Your Compensation is Competitive.
Something you should be doing, whether you are approached about compensation by an employee or not, is determine whether your compensation for your employees is competitive. This process can be a bit tricky for a few reasons. For one, if you are a small law practice (under 15 people), that is something to consider when you may be looking up other comparable positions. Larger CPA, financial advisory or law firms are typically going to have deeper pockets to compensate employees. You can certainly look at Robert Half Salary Guide and get an idea of a salary range for your employees. It is important to remember that these ranges include firms of all sizes and total compensation (not base). Another option is to take a look on Indeed.com for your specific area and for comparable job titles/positions (which may also be an issue, as you may have administrative assistants you’ve labeled as “legal assistants”, “paralegals” or “executive assistants”, which you may wish to revisit). Keeping now an hourly or annual salary range that you determine to be competitive in your region, we typically recommend a lower base salary and utilizing monthly performance bonuses as a means of bridging the potential gap. If done properly, this can typically bring employees from the lower part of the range to the upper part of the range (or beyond!). This brings me to…
TIP #3: Institute a Monthly Bonus Structure (Even for Staff!).
If you are not utilizing a monthly bonus structure, you are missing out! Many law firms have bonus incentives for associate attorneys, which are typically based on individual production or billable hours. However, most people give out bonuses at the end of the year (think of Clark Griswold in Chevy Chase’s Christmas Vacation). People have no idea when, how much, or what they did to earn their bonus. Associate attorneys can be bonused on a percentage based on production and support staff can have individualized bonuses based on certain tasks that they may perform that bring in money or as part of an overall discretionary bonus that’s issued when the firm hits its monthly revenue goal. We have a few programs (see below) that you might be interested in that walk you through, step-by-step how to do this.
TIP #4: Evaluate Your Own Budget, Fees and Revenue Goals.
Last, but certainly not least, you might also wish to take a look at your firm budget (do you even have one?) and also your current fees. We find, more often than not, attorneys are undercharging and could increase their fees. For example, ask yourself this. When was the last time you increased your fees? If it’s more than 12 months ago, then there’s a good chance that you are overdue for an increase in fees, because if you’re like any other business out there, your costs have gone up considerably in the last one to two years. By monitoring your budget (we even provide a bonus for our Director of Operations to stay within the monthly budget on expenses!) and setting monthly revenue goals, you will create a team effect, which will not only allow you and your firm to begin to generate more revenue, but you will be able to incentivize and compensate your employees more. It becomes a win-win for everyone all around!
BONUS TIP #5: Have a Discussion with Your Employee.
If you determine that you are offering a competitive salary and you have monthly bonus structures in place and have increased your fees to a point where you are unable to increase them any further, then it is worth a discussion with your employee to better understand why they are requesting a raise. Perhaps they have taken on more responsibility? Perhaps you simply haven’t given your employee a raise in some time? Or, perhaps it is merely their own financial situation that they are in which requires them to increase their salary. If that is the case, you still might not be in a position to fulfill their request for a raise (or as large of a raise as they may be requesting). We have also heard of people asking for outrageous increases in their salary with no reason to substantiate such an increase. And, by no means, should you ever get into a position where you are being pressured to give an employee a raise or they walk. Once an employee sees they potentially have this kind of power, they will continue to walk all over you and the extortion will continue!
In conclusion, an employee asking for a raise does not have to be a nerve-racking, fear-inducing experience. When you cultivate a working environment where people feel like they are a valued and respected part of the team, aligned in work where they feel like they are a contributing member of the firm, they will want to continue to work with you. Being clear about specific goals which can allow people to generate more income has been a game-changer for our law firm—as well as our own company and many others who have put this concept to use in their practice!
ABOUT THE AUTHOR
Kristina Schneider is a Practice Success Coach at The Ultimate Estate Planner, Inc. She graduated with a Bachelor’s Degree in Business Administration from Pepperdine University in 2004 and was hired right out of college to work for the Law Firm of Kavesh, Minor & Otis, coordinating and facilitating Philip Kavesh’s “Missing Link” Boot Camps while also providing administrative support to Mr. Kavesh as his Executive Assistant for over seven years. Through her direct hands-on experience in Mr. Kavesh’s law firm, Kristina has assisted numerous estate planning professionals through The Ultimate Estate Planner and, equally as important, many of their staff members, in the successful implementation of Ultimate Estate Planner’s products and systems. She is currently pursuing her MBA degree from Pepperdine University Graziadio Business School. You can reach Kristina at (424) 247-9495 or by e-mail at kristina@ultimateestateplanner.com.