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I talked with one of my team members about another guy who is quitting. During the talk, he mentioned that it might be because there was no pay raise for the past 2 years. These guys (one who I was talking to and another guy who is quitting) are very good at their job, work hard, and love the company and I think it's unfair not to give them any pay raise. I also think that this can actually be the reason why people are quitting.

I want to give background of the company. The company is a startup and there is no procedure about pay raise. As a startup, we need to save money wherever we can but this really affects the company because we actually end up spending more money recruiting people and time to train them.

I plan to talk to the owner (I report to him) about pay raise for everyone in my team but not sure if that is a good idea.

I am their manager and I got a good raise every year.
I did not know that they never got a raise until yesterday. The owner takes care of pay raises. Since I have gotten good raises, I assumed everyone else did.

Yes. As as manager, part of your job is going to bat for the people who work for you, and part of that is asking for pay raises. Especially if you are getting a good raise, you should be asking (and should have been asking) for a decent raise for your good workers.

If no-one was getting raises, that would be different, but as long as there is money for raises for managers, the manager has an obligation to take care of their workers, and pay raises are a very clear sign on whether an employee is valued or not.

Don't talk to the manager about "a" (singular) pay raise for your staff. Talk to him about what the policy will be for implementing raises - typically, organizations pay out a cost of living increase on a known, regular schedule (ie annually) plus merit increases for strong employees, plus promotion increases when a title changes due to someone taking on more responsibility. It sounds like your organization doesn't have any of these standards in place.

It's fair to represent to the owner that you know of frustrations among the team due to lack of raises recently, but you want to solve the problem for good - not just for now. Getting everyone a raise right now doesn't really do anything except postpone the conversation about raise policy until the next time people get upset.

Yes.

• Pay rises will probably be good for your team's morale, which may mean they work more efficiently.


• Pay rises may keep employees in the team, avoiding time and money spent on recruitment to replace those who leave.


• If your team work out that you're standing up for them, they may be more loyal to you, which benefits you personally (now and perhaps in the future) and the company too (if their loyalty to you inspires them to work harder for the company).


• If people are already leaving over pay, your boss needs to know that there is a problem, and what he might need to do about it. In a small company, key people leaving could be an existential threat.


• It would benefit your own career enormously to understand the budget available, perhaps with a view to taking responsibility for it later.

But...

• Budget constraints may make it not possible. Replacing staff is more expensive in the long run, but the long run comes later. There might not be enough in the bank to offer rises right now.


• If asking for a rise gets nowhere, or doesn't get enough for your team, you will need to act as the face of the company when your team ask about a rise. You can't say "it's not my fault, it's the owner's fault!" You represent the company and may have to deliver - and justify - bad news... even if you don't agree with the decision... even if you fought against it.
  

And...

• Might you be able to propose other benefits that might be almost as valuable to your employees as a rise, but which are more palatable to the owner? Schemes like Perkbox (I have no affiliation with them, other similar schemes are available) can save your employees money, which isn't as good as giving them more money, but costs your company less. Or perhaps arrange partnerships and discount agreements with other local businesses, or get money from the budget for regular social events for your team... that kind of thing. Some of your team might really appreciate the company treating the team to a social trip out once a month... others might say they can't pay rent with 2-4-1 cinema tickets and insist on the pay rise. But it's worth a try.


• As suggested in a comment, if the startup shows promise, some employees may accept stock instead of money. Not all will - it's a gamble - if the company succeeds, the stock may be worth a lot of money later. But if it fails, the stock might be worth zero. Some employees might take the gamble. Others might not.

Yes, you should. Ideally, a person should know company politics before joining - what results are expected and what can be achieved. Especially, if you want to work with top performers and people who care about company - if they won't get reward, you'll be left with mediocre who can't find job in other place - and it may cost more.

It is also a question why you're getting a raise and others not. Maybe you are managing team in such way that it is cheap and stable?

There are other things to consider:
If employee will continue to work, is there any room to grow for him in the company?
Can company easily replace an employee? Will extra cost give extra value?
Can old/new employee bring new energy or ideas?

You should not. You must consider that the reason you got a good raise is because your team did a good job without the owner having to give a raise to everyone. The reason companies gives huge money for board of directors is because it is much cheaper than paying a good salary to everyone as long as they make the employees give more for the same money (or less money or less employees...).

A manage must only take care of their own interests and those of company. You are not a union representative you are a company manager. Good managers suggest downsizing, cutting costs not asking for raises for everyone.

I know this sounds very cynical, but you don't want to be fired do you? And yes, I don't want to have a manager like this, but that is also why employees don't choose their manager.

It also don't mean you need to be a monster to be a good manager. You can and should ask for investment in things that makes employess more productive. It is much cheaper and more effective than giving a raise (whose effect is very short, since people get used to the new level quite fast and start to think they should receive a better income and so on). Most of the times employees leaves they jobs because of bad working conditions, unless your company is paying well bellow the market average.