It’s in the news every day. Unemployment is at a five-decade low, and corporate profits are at an all-time high. Labor costs are now beginning to chase that profit. Employees see and hear that salaries are rising and after years of taking small, infrequent increases in compensation, or none, they are beginning to ask for raises whether or not you think their performance merits a pay hike.

Are you ready for those requests? Do you have a good response?

Before you either invite them to get out of your office or grant their wish simply for the sake of keeping the trains running on time, think about what your staff really needs to function as a happy, engaged team.

Fair compensation is certainly part of that. But often someone asking for a raise is equally interested in feedback. They want to understand how you see their performance. Usually this feedback is tied to a raise: “You’ve done well; here’s a raise.” “You haven’t done so well; no raise this year.”

Here’s a suggested plan.

1. Change your mindset. Try not to see these requests as a pain in the butt. View them instead as an opportunity — an indicator of how well you and/or your managers are leading, or aren’t.
2. Know where your wages and benefits rank in the market. Shoot to pay at or a little above the mean. This will be sufficient since for most people, an increase is not just about the money.
3. If you do not have a solid process for giving your team caring, candid, challenging, consistent feedback, start now.
4. Begin by clearly defining the success outcomes of each role. You cannot give feedback without clear expectations, so role clarity is a must. Employees must know exactly what is expected of them. Then use raise requests as an opportunity to say, “Let’s look at your performance.”
5. Finally, show your teammates how their work contributes to the success of the organization. Whenever possible, tie their efforts to something concrete, like sales and/or profits.

This plan will help your employees feel valued in more ways than just monetarily. An added bonus is that both employees and managers will have plenty of merit-related data when future raise requests roll around.