How to Navigate Employee Raises

Sooner or later, every daycare owner faces it: a trusted teacher pulls you aside and asks for more money. Childcare employee raises are one of the trickiest conversations in the business — done well, they build loyalty and lower turnover; done poorly, they cost you a great employee. This guide covers exactly how to handle the request in the moment, what factors to weigh, and how to deliver the final answer professionally.

How to Respond When an Employee Asks for a Raise

Picture the scene. The last pickup is gone. You are doing a final sweep before locking up. A trusted teacher stops you in the infant room and asks for a minute of your time — and before you know it, she’s asking for a raise.

Before you panic, follow these three rules:

• Keep your tone neutral and open. Whatever your gut response is, keep your face and voice steady. You want to communicate that you are listening and that you value the person in front of you, regardless of the answer.
• Do not give an immediate yes or no. Even if you already know the answer, say something like: “Thank you for sharing this with me. I need some time to research and think it through. Let’s plan to follow up in two weeks.” This single sentence buys you time and prevents a “deer in the headlights” reaction.
• Acknowledge how hard the ask is. Most employees rehearse this conversation for days before working up the nerve. Telling them you appreciate their openness — even before you have an answer — builds trust on the spot.

Once the initial conversation is closed, you have two weeks to do the real work: deciding whether the raise is justified.

Factors to Consider Before Granting Childcare Employee Raises

Walk through every one of the seven factors below before deciding. Skipping any of them is how owners end up over-paying their weakest staff and under-paying their strongest.

Cost of Living

Many employers grant an annual cost-of-living adjustment to keep wages aligned with inflation. The Social Security Administration sets a benchmark each year — see the current SSA cost-of-living adjustment page for the latest figure (the 2025 COLA is 2.5%). Have your employees received a COLA bump for the current year? If not, the raise request may simply be a course-correction.

Length of Employment

Long-tenured staff who consistently add value deserve recognition. How long has this employee been with you? Tenure alone does not justify a raise — but combined with strong performance, it almost always does.

Performance

Look at the big picture. Has the employee delivered consistent, superior performance over time? Have they taken on extra responsibilities, earned a new credential, or grown into a lead-teacher role? People who go above and beyond should be paid for the value they bring.

Employee Retention

Childcare turnover runs notoriously high. The Indeed Hiring Lab consistently shows childcare among the slowest sectors to fill open roles. As a result, the cost of replacing a strong teacher almost always exceeds the cost of paying them more. If you would genuinely struggle to replace this employee, that should weigh heavily in your decision.

Market Value

Pull current pay data for the role in your area. The Bureau of Labor Statistics childcare worker wage page publishes hourly and annual medians by state and metro area. Is the employee at, above, or below market for your zip code? If they are below, a market-based bump is the easy yes.

Pay Structure

Look at your team as a whole, not the individual in isolation. It is demoralizing for veteran teachers to see new hires brought in at a similar or higher rate. Does the requested raise fit logically into your overall pay bands? SHRM’s compensation guidance stresses internal equity as one of the strongest predictors of staff trust.

Your Business Budget

Finally, can you actually afford it? Whether the employee deserves a raise is one question. Whether your business can fund it without breaking ratios, cutting hours elsewhere, or running negative is another. Pull your KPIs before you decide — our guide on the important KPIs to track for your ECE business walks through the labor-cost ratios that matter most.

What Not to Consider for Childcare Employee Raises

Some factors should never enter the decision. Two stand out.

The Employee’s Personal Circumstances

It’s hard to hear about a teacher’s medical bills, divorce, or new roof. Be a caring employer and offer what support you can. However, raises are a business decision based on the value the employee adds — not on personal hardship. Conflating the two leads to wage inequities you cannot defend later.

Your Own Personal Feelings

It is easy to let irritation, awkwardness, or favoritism drive the answer. Don’t. Run the data first. Even if your answer is no, the employee deserves a reasoned explanation grounded in evidence — not in how you happened to feel that day.

How to Say Yes

If you decide to grant the raise, plan the follow-up carefully:

• Decide whether the increase is a percentage or a fixed dollar amount.
• Set the effective date and confirm it in writing.
• Use the conversation to thank the employee for their work and reinforce why you value them on the team.
• Set new performance goals for the next review window so the raise feels earned and forward-looking.

Document the change in your payroll system the same day. While you are at it, make sure your raise policy is captured in your employee handbook so future requests follow a clear process.

How to Say No

If the answer is no, the conversation is harder — but no less important. Be specific, be respectful, and offer a path forward. Some clear scripts:

• “I reviewed your request and researched the market for your role. Based on what I found, your current pay is appropriate for your position and experience.”
• “You are not eligible for a raise right now, but I’d love to set the following goals with you and revisit this conversation in six months.”
• “I would love to grant your request, but I cannot fit it into our budget at this time. Here’s what would need to change for that to happen.”

You don’t have to justify yourself, but you do owe the employee insight into your reasoning. As a result, the “no” conversation often turns into one of the most trust-building moments of the year — even when the answer disappoints.

Alternatives to a Cash Raise

If a raise is off the table, consider whether an alternative reward fits:

• A one-time bonus for completing a specific project
• Additional paid time off or a flexible-schedule day per month
• Funded continuing education or a CDA renewal
• A title change with documented career-path next steps
• Investment in the training they’ve asked for — see our guide on identifying employee training needs

None of these replace cash forever, but they often bridge the gap between what the budget allows now and what the employee deserves.

Get the Financial Side Right Before the Conversation

Childcare employee raises are ultimately a math problem with feelings on top. The more clearly you understand your labor cost, your margins, and your cash flow, the easier — and fairer — every raise conversation becomes. If you struggle to know what you can afford, our guides on building a financial dashboard for your childcare business and addressing tough employee conversations are good starting points.

Honest Buck Accounting helps childcare owners stretch their budget, tighten their financial processes, and grow with confidence. Schedule a call with our team to free up the financial side of your business so you can get back to what you love most.