When To Give Raises – and What To Do If You Can’t

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It's hard to know when to give raises to employees. Words of thanks go a long way, but monetary rewards and gifts go even further in retaining valued employees. While most restaurant and café owners can’t afford to give out annual raises (except perhaps irregularly, based on the merit of an exceptional employee), paying an above-market wage can actually save you money.

You’ll have to balance the rest of your overhead with payroll, but higher wages are something worth working toward. When it comes down to it, if you offer an above-market wage to an employee that does an above average job, you’ll keep them around longer. Higher wages attract higher-caliber employees.

If you can afford to give small raises, consider starting new employees at minimum wage (plus tips, of course) and let them know that pay raises will be considered at six- or 12-month intervals, based on performance. The raise could be as little as 50 cents an hour, but it will incentivize them to do their best. (No one wants to be denied a raise, no matter how small.) When the day comes to decide whether or not they’ll get a raise, give them a formal performance review, with written and spoken feedback, to back up your decision. If you don’t give them a raise, praise the things they do well and give them specific things to work on to achieve a raise in the future. Be gentle but clear; the denial of a raise is never easy. Try to make your employee feel as encouraged as possible about the future, rather than defeated.

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If you can’t afford to give raises, there are still lots of ways to show your appreciation:

Give small gifts such as movie tickets, gift certificates, and even cash. For only a few dollars, you can reward a job well done. Be spontaneous; if it’s a predictable award it will lose its impact and become expected. The reward should also complement the achievement. Don’t give the same $20 gift certificate for a person staying late one night to finish a task, as you would for a person who saved an important account through months of extra effort.


  • Make sure to reward as quickly as the achievement was accomplished. Giving a reward out months after hitting a targeted goal does not go over very well. And at that point they are most likely already focused on the next target.
  • Match the award with the person. It’s better to give an award that means something to the awardee, than a generic offering. If they like music, give them a certificate to a music store. If they like fine dining, give them a voucher for a great restaurant. When you get to know your employees, this could come naturally.

Paid time off and unpaid leave. Letting people go home early when business is slow, and still get paid, can be considered an award. This can also go for longer lunch hours and extra vacation time. Some people are happy to just go home early, even if it is unpaid. (Keep in mind that not all state laws allow these types of rewards.)

Plaques or certificates might work when recognizing an employee of the month, but don’t be surprised if it gets old, especially if the same person always wins. Instead, use this approach for major accomplishments on a yearly basis. If it is truly special recognition, it will be much more effective if it’s handed out infrequently.

Another valuable award you can give your staff is to mentor them. Talk to them individually about where they want to be in three to five years. Make yourself available for advice, and extra training. If they want to take part in barista competitions, learn computer software that will benefit your business, or take accounting classes so they can help with bookkeeping, consider paying for their training. It will make them a greater asset to you, and you to them.