How small businesses should handle pay rise requests

Pay rise conversations are becoming more common as living costs rise and salary information becomes easier to access. For small businesses, these discussions can be challenging, and inconsistent handling can lead to complaints or even formal grievances. A simple, fair process helps avoid problems and ensures employees feel listened to.

Although employees do not have an automatic legal right to a pay rise, employers must still make decisions fairly. Pay decisions cannot discriminate, punish someone for raising concerns, breach minimum wage law or undermine the trust and confidence required in the employment relationship.

Employment contracts also matter. Many include an annual salary review clause, but this does not guarantee an increase. It does, however, require the employer to consider the request properly.

Ignoring the review altogether, or treating it as a formality, can amount to a breach of contract. Even without a review clause, employers must act in good faith and avoid decisions that appear arbitrary or retaliatory.

When a pay rise request is made, employers will usually either approve, decline or defer. Approving should come with a clear explanation, such as performance, responsibilities or market conditions. If you decline, be honest about the reasons and ensure performance concerns have been raised previously not for the first time in a pay meeting. If you defer, set a clear timeframe; leaving the decision open-ended only breeds frustration.

Whatever the outcome, follow up in writing. A short, factual summary helps avoid misunderstandings and provides a useful record if the matter is raised again. It’s good practice to assume that anything written may one day be disclosed through a Subject Access Request, so keep it professional and accurate.

Consistency across the business is key. Employees compare notes, and inconsistent reasoning can quickly damage trust. Make sure managers use similar criteria, give clear explanations and document decisions properly.

Handled well, pay rise discussions do not need to be difficult. A fair, transparent approach helps small businesses make confident decisions while maintaining good relationships with their teams.

Contact us at enquiries@121hrsolutions.co.uk and we can discuss and further queries you may have on this subject.

How small businesses should handle pay rise requests

121 HR Solutions Ltd