Benefits and Compensation

Why Would an Employee Decline a Raise?

The Society for Human Resource Management (SHRM) recently published an article discussing the legal ramifications of an employee turning down a raise from his or her employer, and it brought up a very perplexing question: Why would an employee turn down an increase in pay?

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SHRM’s article outlined many good reasons an employee might do this, such as:

  • The raise might put him or her into a financial situation wherein he or she no longer qualifies for certain government benefits and, thus, will have a negative outcome overall.
  • The raise may impact other things, like divorce proceedings, alimony, child support, etc.
  • The raise may come with strings attached, like a noncompete agreement or other terms the employee doesn’t agree with.
  • The raise may make the employee think his or her job will be more at risk because having higher pay will make you more likely to be laid off in the future.

These are very valid reasons someone may turn down a raise. Let’s take a look at some additional examples:

  • An employee may be angling for a larger raise amount and may fear that taking the raise on offer will hinder his or her ability to get even more either immediately or in a short time. Or, he or she may be hoping for a different type of benefit change, such as more vacation days, and may not want to take the raise in lieu of that.
  • The employee may feel the raise is being offered for the wrong reasons, such as to placate the employee regarding a different complaint and smooth over the root problem. The employee would prefer the root problem be addressed.
  • The employee may not want the increase in responsibility that may come along with the pay raise. For example, not every employee wants to take on leadership or supervisory roles, and pay raises may be part of a role change that he or she is not keen on undergoing. Additionally, the new role may have negative components like a longer commute or higher stress.
  • There may be nongovernmental benefits that the employee may lose, such as financial aid for children, or reduced rates for other expenses that are based on income levels—things the employee may no longer qualify for if he or she accepts the raise. (Thus, the raise is negated by the lost benefit.) This could also apply to some types of tax breaks.
  • Someone may turn down a raise for philosophical or equity reasons. For example, and employee may feel that pay rates are not fair within the organization and may want to make a statement by declining a raise until those who are compensated less are brought up to parity.
  • Some employees may prefer to barter that raise for some other perk, like a shorter workweek without more money.

What has your experience been with employees declining pay raises? Have you seen it in your organization or one you’ve worked in previously? How did the organization navigate the situation?

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.