John Jonas walks through how his team gives raises: individual reviews in December, implementation in January, performance-based and tied to what the business can afford. Most raises are $25 to $100 per month. He avoids oversized increases that set unrealistic expectations.
Questions this episode answers
December.
January (typical, not mandatory).
Between $25 and $100 per month (round numbers).
Almost everybody on the team is salaried and paid a monthly amount.
Chapters
Welcome to the Secret Sauce of Outsourcing podcast that's dedicated to making you better at working with online Filipino specialists. This is episode 388, how we deal with raises. So we typically give raises in January, but the process starts in December. And in this podcast, I'm gonna go over how we do raises, not how it's proper to do raises or the correct way to do raises, because there isn't really a correct way or a proper way. I'm just gonna give you a bunch of things to think about, some things that I've seen other people do, how we do it, some. So here's kind of our process. In December, typically, we both start reviewing our list of people who work for us and how much they make and how much we think they should get in bonuses. Now, this includes how well do they do throughout the year. And we're typically gonna start addressing issues that we come up because sometimes we ignore issues throughout the year, which we shouldn't do, but we do. Then come January, we're gonna review this again in December. The review is geared towards giving people a bonus In January, it's geared towards reviews. We. We review the same thing individually. We're not doing this together in a meeting. We don't really ever have meetings. Well, we do. It's just very, very rare. So we're going to review these things individually, write down our notes and our suggestions for what we think we should give. Now, we're going to do this based off of their performance last year, how well we think they did, what kind of effort they're putting in, and what we can afford. So typically, when hiring a new ofs, we don't tell them that they're going to get a guaranteed raise after a certain amount of time. We just tell them that we want them to try hard. And we typically give raises in January, although it's not guaranteed, and we tell them based off of their performance. So in January, they don't know what to expect. They don't know if they can expect a raise. And if someone. If we hired someone in November, then in January, we're probably not going to give a raise because too early to give that raise. We've also on occasion given a raise after a number of months because we hired someone, we started them off lower than they wanted to be, then we're going to raise them in a couple months to where we think they should be based off of. Yes, their performance is actually where we expected them to be. So then in January, people only know that they're getting A raise. When we send them an email and say, hey, we're raising your salary, and thank them for the work that they did this past year and tell them our expectations for the year coming. So they don't. There's no expectation for a raise? Well, some people have been with us long enough. They probably have an expectation. But typically new people, they don't have an expectation of a raise because we haven't given that expectation. From there moving forward, we notice that raises, it's a motivating factor, like people will often improve work after getting a raise. Not significantly, but we'll notice it. So this is rare, but there have been occasions where we didn't give a raise because performance didn't warrant the raise. And usually when this happens, we won't say, hey, we're not giving you a raise. We'll just bring something up. And it gives people a chance to justify their situation or to tell you what's really going on or to explain. It also gives us a chance to talk back and forth and be honest with each other and come up with a solution. So now back to actually giving the raise. And how much do we give? Well, almost everybody on our team is salaried. We pay them a monthly amount. That amount is set regardless of how much they work. We're not tracking their hours. So we typically give raises between, let's say, 25 to a hundred dollars per person per month. And that will depend on how much they're currently making and percentage there. But usually it's a nice round number. And we're not like taking a 6% raise or something like that. We just, we look at it and say, well, I think you're, you're better and. Or I think you have more to give or whatever it is. Right. So we're typically giving 25 to $100 a month in raise. I have had some employers say, oh, my person's working five, making $5 an hour. I'm gonna give them a $1 an hour raise. Well, that's fine. That $1 an hour is a 20% raise, which is a significant raise, and I'm sure they'll be thrilled with it. The employer or employers have often asked me, is $1 an hour enough of a raise or is it not? Is it not enough? And when I've asked my people, you know, what do you think about this employer giving this $1 an hour raise? They say, that's too much. But again, there's not a correct way to do this. One thing I would consider and something we Consider is sustainability. So we look at what we can afford to give and we could afford to give more or we could afford to give less, depending on how much we're making, whatever it is. But just because you can afford more doesn't make that correct. It does set an expectation for the future. And what we hope to have is a sustainable long term working relationship with people. And if you give really big raises once or twice, then really big raises become expected. And if that's sustainable for your business, it's a different story. But if you're giving, if you have a $5 an hour person, you're giving a six dollar an hour raise. Six. Next year you're going to be at seven and next year you're going to be at eight and nine and ten in five years, you know, they've, their, their wage has doubled in five years, which, okay, great, as long as you, your business can sustain that. And that's what I'm working towards is you want this to be sustainable. And if you're giving raises that aren't sustainable over time, that's a problem. And here's why it's really a problem. It's not a problem in giving them more money because I'm all for paying people, giving them more, helping them rise out of their current situation, get a better life. I love that. But if you give a really big raise this year and next year, you give a small raise very, very often in the Philippines, they're going to think, what did I do wrong? That they didn't give me as much of a raise this year. They're going to think, why are they mad at me? Or what have I done? Or is my job in jeopardy? And it can actually cause their work to suffer because they're really worried about making a mistake now. So not in every case, but I've seen it enough times. So considering sustainability and affordability and what are you going to do next year? Is part of this raise conversation. So now let's talk about hourly people, how we handle it. So typically we would handle an hourly person. We would base it off of exactly the same way we do a salaried person. So an hourly person, we take an approximation of how much they make per month. We're going to give a similar raise to what our salaried people are and then we're going to cut that back into an hourly number we'll make, we'll do the division, whatever it is. Then there have been occasions where we have given a really big raise based off of someone's Exceptional performance throughout the year. Sometimes we give that raise during the middle of the year because they're so good. Typically it's going to be still be in January. Every time we've done that. We have also given the explanation that I wouldn't expect this next year. I don't know. But we're just really happy with what you've done, with what you've done. We don't often give raises like this. We'll explain it to them. So do you have to give a raise in January? Could you do it in June? Yes, you could do it in June. You don't have to do it in January. Nothing magical about January. That's just how we do it. And again, there is no standard for how this should work. I just want to give you things to consider, and especially in considering that the last year, I mean, it's 2024 now, the last year has had a lot of inflation and wages generally are going up, but they're not going up as much as people want you to think. My son who's in the Philippines keeps talking to me about people making US$400 a month. If they could make $400 a month, they'd be really happy. So I mean, for people to be making $800 a month or $1,200 a month, you know, that's. It's pretty good. They're not like kings of the world making that money, but they're doing really well. And so when people tell you, oh, no, I need to make $10 an hour, well, you know, there aren't very many people in the Philippines that make $10 an hour. So do they need to make that? No. Do you need to give a raise? No. Should you? Yeah, you probably should. And it's part of just being a good boss and taking care of the people that, that work for you and the people that take care of you.
