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Should you retain a key employee or hire a replacement? Explore retention costs, recruitment risks, salary negotiations and Executive Assistant hiring strategies..
Your Best Employee Wants a 40% Pay Rise. Is It Cheaper to Keep Them or Let Them Go?
Imagine one of your strongest employees walks into your office and asks for a 40% pay rise. They have been with the business for years, understand your clients, know how things really work behind the scenes and have become the person everyone turns to when something needs sorting.
Let’s say they currently earn £60,000 a year. They are now asking for £84,000 — an additional £24,000 annually, before employer on-costs.
That is usually the first figure a business owner focuses on. And the immediate question is understandable: “Is this person really worth another £24,000 a year?”
But from a commercial perspective, that is not quite the right question.
The company is not simply choosing between two salary figures. It is choosing between several possible outcomes: retaining the employee on revised terms, replacing them, restructuring their remuneration, redesigning the role or accepting that the relationship has reached its natural end.
👉 The decision should be based on the economics of each scenario, not the size of the pay rise alone.
Let’s say they currently earn £60,000 a year. They are now asking for £84,000 — an additional £24,000 annually, before employer on-costs.
That is usually the first figure a business owner focuses on. And the immediate question is understandable: “Is this person really worth another £24,000 a year?”
But from a commercial perspective, that is not quite the right question.
The company is not simply choosing between two salary figures. It is choosing between several possible outcomes: retaining the employee on revised terms, replacing them, restructuring their remuneration, redesigning the role or accepting that the relationship has reached its natural end.
👉 The decision should be based on the economics of each scenario, not the size of the pay rise alone.
1
Mistake #1: Calculating the Cost of the Pay Rise, but Not the Cost of Replacement
The additional salary is straightforward to calculate. The full cost of replacing a valued employee is not.
Recruitment expenditure is only one component. There is also the management time spent interviewing candidates, the disruption caused by an unfilled position, the pressure placed on the remaining team and the time it takes for a new hire to become fully effective.
A realistic replacement-cost calculation should consider:
✅ Recruitment and candidate assessment.
✅ Time spent by the founder, hiring manager and HR team.
✅ The commercial impact of leaving the position vacant.
✅ Additional workload absorbed by colleagues.
✅ Handover and loss of organisational knowledge.
✅ Onboarding and management support.
✅ Reduced productivity during the new hire’s ramp-up period.
✅ The possibility of making the wrong hire.
✅ Potential disruption to clients, suppliers or critical projects.
SHRM’s 2025 benchmarking research reported an average cost per hire of $5,475 for non-executive positions and $35,879 for executive appointments in its US sample. The median time to fill a position was approximately six weeks.
These are US benchmarks, not UK recruitment costs. Nevertheless, they illustrate an important principle: replacing a business-critical employee can be a considerably more expensive exercise than the recruitment fee alone suggests.
This is particularly relevant to executive support positions. When a founder needs to hire an Executive Assistant, Personal Assistant or senior Business Assistant, replacing an established employee involves rebuilding far more than a list of tasks.
The new person must learn the executive’s preferences, decision-making style, relationships, priorities and the unwritten rules of the organisation.
The principle worth remembering: compare the full cost of retention with the full cost of replacement — not simply the proposed pay rise with the employee’s current salary.
Recruitment expenditure is only one component. There is also the management time spent interviewing candidates, the disruption caused by an unfilled position, the pressure placed on the remaining team and the time it takes for a new hire to become fully effective.
A realistic replacement-cost calculation should consider:
✅ Recruitment and candidate assessment.
✅ Time spent by the founder, hiring manager and HR team.
✅ The commercial impact of leaving the position vacant.
✅ Additional workload absorbed by colleagues.
✅ Handover and loss of organisational knowledge.
✅ Onboarding and management support.
✅ Reduced productivity during the new hire’s ramp-up period.
✅ The possibility of making the wrong hire.
✅ Potential disruption to clients, suppliers or critical projects.
SHRM’s 2025 benchmarking research reported an average cost per hire of $5,475 for non-executive positions and $35,879 for executive appointments in its US sample. The median time to fill a position was approximately six weeks.
These are US benchmarks, not UK recruitment costs. Nevertheless, they illustrate an important principle: replacing a business-critical employee can be a considerably more expensive exercise than the recruitment fee alone suggests.
This is particularly relevant to executive support positions. When a founder needs to hire an Executive Assistant, Personal Assistant or senior Business Assistant, replacing an established employee involves rebuilding far more than a list of tasks.
The new person must learn the executive’s preferences, decision-making style, relationships, priorities and the unwritten rules of the organisation.
The principle worth remembering: compare the full cost of retention with the full cost of replacement — not simply the proposed pay rise with the employee’s current salary.
2
A Business Scenario: “We Don’t Pay That Much for This Role”
Consider an illustrative example involving a service business with approximately 50 employees.
Several years earlier, the founder hired a Business Assistant to manage their diary, coordinate meetings, organise travel, liaise with suppliers and follow up on delegated tasks.
As the business expanded, the role evolved. The assistant began coordinating project updates, supporting recruitment, preparing decision briefs, monitoring selected payments and acting as a communication link between the founder and several senior colleagues.
Nobody formally redesigned the position. The job title remained the same, but the responsibilities had changed substantially.
When the employee eventually requested a significant salary increase, the founder’s immediate response was:
“That is far too much for a Business Assistant.”
The difficulty with this reasoning is that the business was still benchmarking a job that no longer existed in its original form.
A more useful assessment would begin with four questions:
✅ What was the employee originally hired to do?
✅ What are they actually doing today?
✅ Which decisions can they now make independently?
✅ Which business outcomes are they accountable for?
Only then does it make sense to establish the market value of the role.
Sometimes an employee has not become too expensive for their position. They have effectively moved into a different position without the organisation formally recognising it.
Several years earlier, the founder hired a Business Assistant to manage their diary, coordinate meetings, organise travel, liaise with suppliers and follow up on delegated tasks.
As the business expanded, the role evolved. The assistant began coordinating project updates, supporting recruitment, preparing decision briefs, monitoring selected payments and acting as a communication link between the founder and several senior colleagues.
Nobody formally redesigned the position. The job title remained the same, but the responsibilities had changed substantially.
When the employee eventually requested a significant salary increase, the founder’s immediate response was:
“That is far too much for a Business Assistant.”
The difficulty with this reasoning is that the business was still benchmarking a job that no longer existed in its original form.
A more useful assessment would begin with four questions:
✅ What was the employee originally hired to do?
✅ What are they actually doing today?
✅ Which decisions can they now make independently?
✅ Which business outcomes are they accountable for?
Only then does it make sense to establish the market value of the role.
Sometimes an employee has not become too expensive for their position. They have effectively moved into a different position without the organisation formally recognising it.
3
Tool #1: The Role Drift Audit
In growing businesses, responsibilities often evolve faster than job descriptions, reporting lines and salary structures.
A Role Drift Audit helps establish whether the employee’s actual contribution still matches the position they were hired into.
Create four columns:
Original responsibilities → Current responsibilities → Level of accountability → Current market value
Review the work performed over the past two or three months rather than relying on an outdated job description.
The exercise usually reveals one of two situations.
Scenario A: The employee has genuinely grown beyond the role. Their responsibilities have expanded, their decisions carry greater commercial consequences, they operate more independently or have taken ownership of outcomes previously managed by the founder. A salary increase may therefore represent an appropriate adjustment to the role’s actual value.
Scenario B: Salary expectations have increased, but the contribution has not. Responsibilities, autonomy and commercial impact remain broadly unchanged, while the market offers comparable candidates at a lower cost. In this case, a 40% increase may be difficult to justify.
Length of service matters, but it is not a substitute for evaluating contribution.
An employee’s commercial value should be assessed against the results they can deliver, the responsibilities they carry and the market for those capabilities.
A Role Drift Audit helps establish whether the employee’s actual contribution still matches the position they were hired into.
Create four columns:
Original responsibilities → Current responsibilities → Level of accountability → Current market value
Review the work performed over the past two or three months rather than relying on an outdated job description.
The exercise usually reveals one of two situations.
Scenario A: The employee has genuinely grown beyond the role. Their responsibilities have expanded, their decisions carry greater commercial consequences, they operate more independently or have taken ownership of outcomes previously managed by the founder. A salary increase may therefore represent an appropriate adjustment to the role’s actual value.
Scenario B: Salary expectations have increased, but the contribution has not. Responsibilities, autonomy and commercial impact remain broadly unchanged, while the market offers comparable candidates at a lower cost. In this case, a 40% increase may be difficult to justify.
Length of service matters, but it is not a substitute for evaluating contribution.
An employee’s commercial value should be assessed against the results they can deliver, the responsibilities they carry and the market for those capabilities.
4
Three Costs Every Founder Should Understand
A sound decision requires three separate calculations.
1. Cost of Retention
This includes the additional salary, employer on-costs, bonuses, benefits and any other commitments introduced as part of the new package.
Calculate the annual cost of keeping the employee on the proposed terms.
2. Cost of Replacement
A practical model is:
Recruitment costs + vacancy costs + management time + onboarding + ramp-up losses + the financial impact of hiring risk.
For senior or business-critical employees, consider the potential cost of delayed projects, disrupted client relationships and responsibilities returning to the founder.
These estimates should distinguish direct expenditure from potential business losses to avoid double-counting.
3. Cost of Dependency
This is often the most revealing calculation.
Ask yourself:
What would stop working if this employee became unavailable tomorrow for 30 days, with no opportunity to hand anything over?
Perhaps they are the only person who understands the history of a major client relationship. They may hold important supplier contacts, know why certain decisions were made or act as the sole connection between several functions.
This is key-person risk: a business-critical dependency concentrated in one individual.
It creates a paradox. The more damaging an employee’s departure would be, the stronger the commercial argument for retaining them. But it also strengthens the case for reducing the organisation’s reliance on them.
A valuable employee may be worth retaining. Making the business permanently dependent on them is a different matter.
1. Cost of Retention
This includes the additional salary, employer on-costs, bonuses, benefits and any other commitments introduced as part of the new package.
Calculate the annual cost of keeping the employee on the proposed terms.
2. Cost of Replacement
A practical model is:
Recruitment costs + vacancy costs + management time + onboarding + ramp-up losses + the financial impact of hiring risk.
For senior or business-critical employees, consider the potential cost of delayed projects, disrupted client relationships and responsibilities returning to the founder.
These estimates should distinguish direct expenditure from potential business losses to avoid double-counting.
3. Cost of Dependency
This is often the most revealing calculation.
Ask yourself:
What would stop working if this employee became unavailable tomorrow for 30 days, with no opportunity to hand anything over?
Perhaps they are the only person who understands the history of a major client relationship. They may hold important supplier contacts, know why certain decisions were made or act as the sole connection between several functions.
This is key-person risk: a business-critical dependency concentrated in one individual.
It creates a paradox. The more damaging an employee’s departure would be, the stronger the commercial argument for retaining them. But it also strengthens the case for reducing the organisation’s reliance on them.
A valuable employee may be worth retaining. Making the business permanently dependent on them is a different matter.
5
A 40% Pay Rise Is Not Always Just About Money
A substantial salary request can be a straightforward market-rate negotiation. But it can also signal that the employee’s responsibilities, professional ambitions or expectations have moved beyond the role the company continues to offer.
Work Institute’s employee retention research has consistently identified career-related factors among the leading reasons for voluntary departures. That makes it risky to assume compensation is always the underlying issue.
Before making a counteroffer, consider holding a structured stay interview.
Ask:
✅ How has your role changed over the past year?
✅ Which outcomes are you now accountable for that were not originally part of your job?
✅ Which responsibilities do you believe sit above your current level?
✅ Where do you feel your current position is limiting you?
✅ What would the next meaningful career step look like?
✅ Which factors, beyond salary, influence your decision to stay?
✅ If nothing changed over the next 12 months, what would make you consider leaving?
The final question is particularly useful because it shifts the conversation from a single figure to the employee’s underlying motivation.
Work Institute’s employee retention research has consistently identified career-related factors among the leading reasons for voluntary departures. That makes it risky to assume compensation is always the underlying issue.
Before making a counteroffer, consider holding a structured stay interview.
Ask:
✅ How has your role changed over the past year?
✅ Which outcomes are you now accountable for that were not originally part of your job?
✅ Which responsibilities do you believe sit above your current level?
✅ Where do you feel your current position is limiting you?
✅ What would the next meaningful career step look like?
✅ Which factors, beyond salary, influence your decision to stay?
✅ If nothing changed over the next 12 months, what would make you consider leaving?
The final question is particularly useful because it shifts the conversation from a single figure to the employee’s underlying motivation.
6
When Redesigning the Role Makes More Sense Than Simply Increasing Pay
Suppose the audit confirms that the employee has genuinely progressed.
Agreeing to a 40% increase while leaving everything else unchanged may solve the immediate negotiation without addressing the longer-term problem.
A stronger approach is to align four elements:
New outcomes → New accountability → New decision-making authority → New remuneration.
For example, an Executive Assistant who previously followed up on individual tasks might take ownership of a defined operational process. An experienced Business Assistant might become responsible for coordinating a cross-functional workstream, with clear authority and escalation boundaries.
The aim is not to add responsibilities merely to justify a higher salary. It is to establish whether a more senior role is genuinely required and whether the employee is capable of delivering it.
When designed properly, the additional investment should support a higher level of business performance.
Agreeing to a 40% increase while leaving everything else unchanged may solve the immediate negotiation without addressing the longer-term problem.
A stronger approach is to align four elements:
New outcomes → New accountability → New decision-making authority → New remuneration.
For example, an Executive Assistant who previously followed up on individual tasks might take ownership of a defined operational process. An experienced Business Assistant might become responsible for coordinating a cross-functional workstream, with clear authority and escalation boundaries.
The aim is not to add responsibilities merely to justify a higher salary. It is to establish whether a more senior role is genuinely required and whether the employee is capable of delivering it.
When designed properly, the additional investment should support a higher level of business performance.
7
Should You Retain the Employee or Begin Recruitment?
A simple decision matrix can help.
Assess two dimensions: the employee’s value to the business and the difficulty of replacing them.
High value + difficult to replace. Retention deserves serious consideration. At the same time, reduce key-person risk through documentation, knowledge transfer, succession planning and clear access arrangements.
High value + relatively easy to replace. Compare the complete cost of retention with the cost and risk of recruiting an equivalent professional.
Low value + difficult to replace. This is arguably the most concerning position. The business is dependent on someone whose current contribution no longer justifies that dependency. Prioritise knowledge transfer and operational resilience before making a final staffing decision.
Low value + relatively easy to replace. A substantial pay rise is unlikely to be commercially justified unless there are other relevant factors.
The matrix does not make the decision for you. It makes the assumptions behind that decision visible.
Assess two dimensions: the employee’s value to the business and the difficulty of replacing them.
High value + difficult to replace. Retention deserves serious consideration. At the same time, reduce key-person risk through documentation, knowledge transfer, succession planning and clear access arrangements.
High value + relatively easy to replace. Compare the complete cost of retention with the cost and risk of recruiting an equivalent professional.
Low value + difficult to replace. This is arguably the most concerning position. The business is dependent on someone whose current contribution no longer justifies that dependency. Prioritise knowledge transfer and operational resilience before making a final staffing decision.
Low value + relatively easy to replace. A substantial pay rise is unlikely to be commercially justified unless there are other relevant factors.
The matrix does not make the decision for you. It makes the assumptions behind that decision visible.
8
If You Need to Recruit a New Executive Assistant
Executive support recruitment requires particular care because the effectiveness of the relationship depends on much more than technical competence.
When a founder decides to hire a Personal Assistant or Executive Assistant, the initial brief often focuses on familiar responsibilities: diary management, travel arrangements, meeting coordination, correspondence and task follow-up.
Those responsibilities matter. But they rarely provide enough information to identify the right candidate.
Before beginning an Executive Assistant search, establish:
✅ Which responsibilities should genuinely leave the founder’s desk?
✅ Which decisions can the assistant make without approval?
✅ What level of judgement and commercial awareness is required?
✅ How much context will the person need to manage independently?
✅ What communication style works best for the executive?
✅ Which matters must always be escalated?
✅ What would successful performance look like after six months?
Effective Executive Assistant recruitment begins with defining the role, not reviewing CVs.
This is especially important when replacing a long-serving assistant. Matching technical skills alone will not automatically recreate years of shared context and trust.
When a founder decides to hire a Personal Assistant or Executive Assistant, the initial brief often focuses on familiar responsibilities: diary management, travel arrangements, meeting coordination, correspondence and task follow-up.
Those responsibilities matter. But they rarely provide enough information to identify the right candidate.
Before beginning an Executive Assistant search, establish:
✅ Which responsibilities should genuinely leave the founder’s desk?
✅ Which decisions can the assistant make without approval?
✅ What level of judgement and commercial awareness is required?
✅ How much context will the person need to manage independently?
✅ What communication style works best for the executive?
✅ Which matters must always be escalated?
✅ What would successful performance look like after six months?
Effective Executive Assistant recruitment begins with defining the role, not reviewing CVs.
This is especially important when replacing a long-serving assistant. Matching technical skills alone will not automatically recreate years of shared context and trust.
9
Tool #2: The Retention Decision Sheet
Before the final salary conversation, bring the relevant information together on one page.
Record:
✅ Current total employment cost.
✅ Proposed total employment cost.
✅ Market remuneration for an equivalent role.
✅ Estimated replacement cost.
✅ Expected recruitment timeline.
✅ Time required for a new hire to reach full effectiveness.
✅ Management hours required for recruitment and onboarding.
✅ Critical knowledge and relationships concentrated in the employee.
✅ Potential exposure affecting clients, revenue or projects.
✅ Changes in the role since the original appointment.
✅ Availability of an internal successor.
Then add one final question:
What additional business outcome would justify the proposed increase in annual employment costs?
If there is no convincing answer, that is relevant evidence against the increase. If the employee is already delivering results whose value significantly exceeds the additional cost, the calculation may support retention.
One Final Test Before You Decide
Ask yourself:
If this person did not already work for us, would we hire them today on the proposed terms?
A confident yes is a meaningful argument for retention.
A no deserves further investigation. Perhaps the role no longer meets the company’s needs, or perhaps the business is retaining the employee primarily because replacing them feels difficult.
There is also an opposite risk: rejecting a valuable employee because the request feels like an ultimatum.
Neither fear of losing someone nor frustration at being asked for more money is a sound financial model.
Record:
✅ Current total employment cost.
✅ Proposed total employment cost.
✅ Market remuneration for an equivalent role.
✅ Estimated replacement cost.
✅ Expected recruitment timeline.
✅ Time required for a new hire to reach full effectiveness.
✅ Management hours required for recruitment and onboarding.
✅ Critical knowledge and relationships concentrated in the employee.
✅ Potential exposure affecting clients, revenue or projects.
✅ Changes in the role since the original appointment.
✅ Availability of an internal successor.
Then add one final question:
What additional business outcome would justify the proposed increase in annual employment costs?
If there is no convincing answer, that is relevant evidence against the increase. If the employee is already delivering results whose value significantly exceeds the additional cost, the calculation may support retention.
One Final Test Before You Decide
Ask yourself:
If this person did not already work for us, would we hire them today on the proposed terms?
A confident yes is a meaningful argument for retention.
A no deserves further investigation. Perhaps the role no longer meets the company’s needs, or perhaps the business is retaining the employee primarily because replacing them feels difficult.
There is also an opposite risk: rejecting a valuable employee because the request feels like an ultimatum.
Neither fear of losing someone nor frustration at being asked for more money is a sound financial model.
10
Has the Employee Become More Valuable, or Has the Role Become More Expensive?
There are three distinct possibilities.
The employee has become more valuable. They have developed stronger capabilities, greater independence and the ability to deliver more commercially significant outcomes.
The employee believes they have become more valuable. However, their contribution and the external market do not support the requested increase.
The role itself has become more expensive. The company has grown, the responsibilities have expanded and any suitable replacement would now command higher remuneration.
The third scenario is particularly easy to miss.
A founder rejects the current employee’s request, begins recruiting and discovers that qualified candidates expect the same salary — or more.
This is why retention decisions should evaluate the individual, the role and the external market together.
The employee has become more valuable. They have developed stronger capabilities, greater independence and the ability to deliver more commercially significant outcomes.
The employee believes they have become more valuable. However, their contribution and the external market do not support the requested increase.
The role itself has become more expensive. The company has grown, the responsibilities have expanded and any suitable replacement would now command higher remuneration.
The third scenario is particularly easy to miss.
A founder rejects the current employee’s request, begins recruiting and discovers that qualified candidates expect the same salary — or more.
This is why retention decisions should evaluate the individual, the role and the external market together.
11
The Bottom Line
When a strong employee requests a 40% pay rise, the founder should not frame the decision as a choice between giving in and demonstrating authority.
Instead, ask four questions:
✅ What value does this employee create today?
✅ What is the full cost of retaining that value?
✅ What would it cost to replace it?
✅ How exposed is the business to the loss of this individual?
The strongest staffing decisions are based on commercial outcomes, organisational resilience and the real requirements of the role.
The question is not simply, “How much do they want?” It is, “What business outcome are we paying for, and is there a better way to achieve it?”
Instead, ask four questions:
✅ What value does this employee create today?
✅ What is the full cost of retaining that value?
✅ What would it cost to replace it?
✅ How exposed is the business to the loss of this individual?
The strongest staffing decisions are based on commercial outcomes, organisational resilience and the real requirements of the role.
The question is not simply, “How much do they want?” It is, “What business outcome are we paying for, and is there a better way to achieve it?”
12
When the Problem Goes Beyond One Employee
Sometimes a salary negotiation exposes a broader structural issue. Responsibilities have expanded without being formally redesigned, the founder is uncertain which roles to strengthen, or the business needs a different level of executive support.
At SMART AND TALENTED, we help founders and senior leaders clarify their recruitment needs before beginning the search.
Our recruitment diagnostic examines the business objectives, responsibilities, required autonomy and the executive’s management style. This provides a clearer basis for defining the position and identifying suitable candidates.
Following the role-profiling stage, the recruitment process can progress towards a shortlist of three relevant candidates selected for the business requirements and the executive’s working style.
At SMART AND TALENTED, we help founders and senior leaders clarify their recruitment needs before beginning the search.
Our recruitment diagnostic examines the business objectives, responsibilities, required autonomy and the executive’s management style. This provides a clearer basis for defining the position and identifying suitable candidates.
Following the role-profiling stage, the recruitment process can progress towards a shortlist of three relevant candidates selected for the business requirements and the executive’s working style.