A tricky and common problem business owners deal with is how to handle hiring a new employee who makes more than the team you’ve had for years.

Often when you go to hire a great, new team member the current market may demand a salary higher than what you pay current team members or sometimes the position is just a higher paying position.  Either way, once your team finds out (not “if” but when) it can cause an explosion on your team of bitterness and resentment.

Ignoring the issue just allows it to unexpectedly explode in your face one day when a team member announces they are quitting or you can’t put your finger on why she suddenly has an attitude problem or seems to have shut down. Proactively addressing the state of affairs will allow you to take a position of leadership and head off the potential of employees coming to their own conclusions.

We suggest you follow the three steps below to proactively take control of the situation.

1.  Written Standards for Employee Reviews – Look at when the last time you gave your team a review and a raise.  Be honest with yourself.  It is not uncommon to look and see that the current team member hasn’t had a review or a raise for many years, if ever.  We know this is the last thing you want to think about when you are already bringing on a new team member, but consider the possibility the current team you depend on may quit if they find out a new person is making more than them without any context.

This happened to me once.  I’d hired a new Client Services Coordinator and the market, at the time, required I pay her more than the boss’ strategic assistant, who’d been with us for over three years, was being paid.  I was already in conversation with the boss to correct this, but we decided since we were paying out quarterly bonuses the team had earned that month to wait to finalize her raise until the next month.  I thought I was doing her a favor by not overwhelming the boss with too many ‘money discussions’ in the same month but instead alerting him to the issue and getting his agreement to handle it the following month.  Big mistake on my part.  Within two weeks the strategic assistant heard a comment from the new hire revealing her pay rate and was completely offended.  I found out when she came into my office a week later and gave me her two week notice.  She felt so unappreciated she’d applied for another job, which she got, and quit.  And while I wish she’d have discussed the issue with me so I could let her know we were working on it, it was my mistake to not proactive bring up the conversation with her.  Instead I let her come to her own conclusions.  We lost a good team member and to add insult to the situation, the new hire quit a few weeks later!  This was a HUGE learning opportunity for me to proactively address pay conversations.

To avoid this becoming a problem it is best to proactively spark the conversation with existing employees. One quick suggestion is to bring the conversation to your weekly team meeting like this, “Now that we are adding to the team, I think it is an ideal time to start formalizing our Employee Review Process to make certain everyone is on the same track for quarterly and annual reviews. What do you think about taking this on as a top project for this quarter? Let’s schedule a one hour meeting within the next two weeks to brainstorm if raises are automatic, what criteria we want, etc.” You will be amazed at how receptive the team is to this conversation and it eliminates any potential for drama and/or justification on anyone’s part. The act of proactively identifying this area as one of importance and attention up front is authentic.  And if it comes up you can honestly say it’s been identified as an area we need to standardize now that the practice is growing.

2.  Employee Manuals – If you don’t have an employee manual in place, including a process for team reviews and expectations for raises, this is a great time to put one in place.  Start your new employee off right and get your team on the same page. WRITTEN Employee Manuals are a must once the 2nd employee is added to the bus.  It is now time to start operating like a real business, including all facets of HR.

3.  Create Growth Tracks – We realize that the position you just hired may truly be a higher paying position than the ones your current team fill.  This isn’t a matter of who is more important – all team is important – but some positions may carry more pressure to produce revenue and come with a higher salary. Now is the time to have this crucial conversation with your current team members.  Set aside the common misconception that team is paid based on seniority or titles. Let them know everyone has the opportunity to grow in the firm including growing into positions that pay more.  Create a path and plan with each team member of where they’d like to grow and what it would take to be qualified for that role.  Let them know what areas they would need to start learning and stepping into.

You will keep your team members vested in your company as they know how to grow there.  You will also allow some team members to realize they want to stay in a certain position and understand why they aren’t making as much as some other team members.  For example, I had a phenomenal receptionist once.  The best I’ve ever worked with.  We had a client services position open up and she asked if she could move up into that position.  We agreed.  She was fantastic with people, our clients already loved her, and we thought it could be a great fit.  She was thrilled with the promotion and the pay raise that came with it.  However, after a few weeks she came to me and told me that she honestly wasn’t a fit for the position.  The pressure to convert appointments and the increased expectations of hosting evening and weekend workshops was stressed her out, keeping her up at night and interfering with her ability to be there for her young daughter.  We talked it out and agreed that she would move back into her role as receptionist.  It was a great conversation which she was thankfully brave enough to have with me.  We didn’t want her miserable in her new role and she now understood why that position paid more than hers.  There was no bitterness when we hired a new person to fill this role and she made more than her.  The key is that she was allowed to choose her own growth path.  She had a say in the matter versus being ignored.

As long as each team member has a growth track with clear expectations then you can have salary conversations authentically and without fear of team leaving or growing resentful.  Team reviews are a great platform to create a growth track for each team member and to check in at least annually on their progress.

Remember, ignoring the issue will only allow it to fester and become unnecessary, uncontrolled problem(s) versus handling it proactively.

If you are ready to implement employee reviews or take yours to the next level, register for our webinar “Empowering Your Team Through an Employee Review System“.  November 29th at 4-5pm ET.  $45 registration – includes a copy of our Team Member Growth Map™, the tool to support you in preparing and conducting your review.  Click here to register.

Champions For Your Continued Success,

Molly and Laney