Small business owners wear many hats; once you start hiring staff, your role includes that of employer. In addition to selecting and training new staff, you also need to negotiate employee pay increases with current workers. Keep these five tips in mind when sitting down to discuss payment adjustments.

1. Understand the Regional Market and Cost of Living

Business owners who understand their markets are better positioned to successfully negotiate pay raises. Educate yourself on the cost of living and current average salary increases in your region and industry. Some areas of the U.S. are more generous with compensation, while others may seem to lag behind the economy. To help you find out what companies in your industry and region are paying, the U.S. Bureau of Labor Statistics offers detailed information on pay rates across the country.

2. Know Your Competitors' Compensation

Business owners may think of their competitors in terms of vying for customers, but competitors can also steal away prized employees. Be aware of what your competitors offer for compensation to ensure you aren't undercutting or overcompensating your staff. While you might not want to be the highest-paying employer in your niche and/or region, you also don't want to be the lowest.

3. Communicate Regularly With Your Employees

Keep your employees aware of how the business is doing. This helps reduce the chance for surprises when negotiating employee pay increases. Employees appreciate being recognized for their contributions when businesses prosper, and in slow times, they may understand if pay increases are smaller.

4. Clearly Define Employee Roles and Responsibilities

Clearly defining roles and responsibilities for each position early on makes it easier for business owners to research what similar roles in other businesses pay and how much they give for pay increases. Sharing these clear roles and responsibilities with employees also gives them the information to understand what their role is worth. This transparency makes wage negotiation a smoother process.

5. Conduct Regular Performance Evaluations

Regular performance evaluations that become part of the business culture help retain top talent when salary negotiations occur. Your employees will likely appreciate receiving constructive feedback, and they can gain a clear understanding of how their contributions at work are perceived. Regular feedback also helps workers feel connected to their business because owners and/or management have taken time to pay attention to them and evaluate their contributions. This can go a long way toward employee retention during slow times when companies might need to show restraint rather than moving forward with typical annual wage increases.

As a business owner, everyone you work with provides an opportunity to hone your negotiation skills, whether you're encountering suppliers, customers or your staff. Prepare for annual pay rate discussions with these tips and you'll be better suited to arrive at an increase that is fair for both you and your employees.

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