My best employee wants $4 more an hour. I can't afford it or lose her.

The question

An illustrative letter.

The answer

My dear, that you are torn tells me two good things: you value her, and you take your business's finances seriously. Both instincts are right. Let us put real numbers on each side, and then find a conversation that respects her and keeps your shop healthy.

What would the raise really cost?

For a full-time employee working about 2,080 hours a year, $4 more an hour comes to $8,320 a year. Add the employer's share of Social Security and Medicare taxes, 7.65 percent, and it is closer to $8,960, before any effect on other payroll costs. Spread across a month, that is about $750. Seeing it as a monthly figure makes it easier to ask where it could come from.

What would losing her cost?

Usually more than people think. Gallup estimates that replacing an employee costs between one-half and two times their annual salary, and about 40 percent of a year's pay for frontline roles. For someone earning $20 an hour, 40 percent of a year's pay is about $16,600. That includes recruiting, training, the time you spend covering shifts, mistakes while someone new learns, and the customers who notice the difference. Your best employee also carries knowledge no job posting can replace.

So the honest comparison is not $8,320 against nothing. It is $8,320 against the real cost and disruption of starting over.

Where could the money come from?

• Prices. A small increase on your best-selling items may cover much of it. Customers of a well-run local shop often accept modest increases.
• Her contribution. If she can take on work that brings in money, such as running online sales, managing a product line or training new staff, part of the raise can pay for itself.
• Costs elsewhere. Look at your monthly expenses line by line. An unused subscription, an overstocked line or a costly supplier can free up money.

What can I offer if I cannot do it all now?

Meeting in the middle is common and respectful, as long as it is honest.

• Part now, part later. A raise of $2 now, with the second $2 on a specific date written down, gives her certainty and gives you time.
• A results-based bonus. A quarterly bonus linked to sales or another measure she influences shares success without committing you to a fixed cost before the money is there.
• Benefits beyond the wage. A better schedule, extra paid time off, a title that reflects her role, paid training, or a small retirement contribution. Ask her which of these matter most. Sometimes the thing a person values is not the one you would guess.

How do I have the conversation?

Thank her first, and mean it. Tell her she matters to the business. Then be open about the numbers: what you can do now, what you plan to do and when, and what would make the rest possible. Ask what she needs and why, whether it is rent, a family change or another offer. Listen fully before answering. People often stay where they feel respected and told the truth, even when the pay is not the highest available.

Whatever you agree, put it in writing, and keep your promises to the day. A delayed raise that arrives exactly when promised builds more loyalty than a vague assurance.

Is her request reasonable for the job?

It helps to know. The Bureau of Labor Statistics publishes what workers in many occupations earn in your area, and local job postings show what other shops are offering. If similar jobs nearby pay what she is asking, the market has already set the price, and the question becomes how you get there. If her request is well above it, you can say so kindly, and still show her the path to more.

What if she has another offer?

Then ask to see what is being offered, and compare the whole picture: pay, hours, commute, benefits and how she is treated. Do not promise what you cannot afford to keep. If you truly cannot compete, part kindly, ask her to help train her replacement, and leave the door open. Good people sometimes come back.

How do I keep this from happening again?

Review pay once a year for everyone, on a set month, using what similar jobs pay locally as a guide. When raises are planned and expected, they become part of your budget rather than a crisis. Build them into your prices and your plans each year.

You have a person worth keeping, my dear. Price both choices, offer what you honestly can with a written date for the remainder, and let her see that her value is understood.

One thing to do this week

Write down the monthly cost of the raise and of replacing her, then set a time to talk with her about what you can offer and when.