my employee asked for a 170% raise

A reader writes:

One of my employees has asked for a massive raise. He has good reasons for wanting a raise: his responsibilities have ended up being very different than what he was originally hired for, he’s been doing very well with them, and he’s definitely paid below market for what he’s ended up doing. We hired him at $15/hour for an entry-level position with no hard requirements, and based on some quick market research, I’d say the work he’s doing now is closer to a $20-$25 range, so I’m actually in favor of giving him a pretty substantial increase.

The trouble is that he’s asked for an increase to $40/hour, and he’s only been here for four months. That’s more than I make, and I’m honestly shocked that he thought this was reasonable to ask for. He says he did some market research, but that number hasn’t been supported by anything I’ve been able to find. Four months also seems like a short amount of time to me, but I don’t know if the significant change in duties should override that.

I want to advocate for my employee with our company’s owner (who is very reluctant to spend money), but I am suspicious that bringing the employee’s $40/hour request to him will make my employee (and potentially me as well) look completely out of touch with reality. Our owner is extremely hands-off — we’re all remote, and I talk to him maybe once every month or two for about 10 minutes. I told my employee that $40/hour was more than I make and gently suggested that asking for a lower number might be a better idea, but he shrugged that off and said he isn’t set on that number, but sees it as a good “starting point.”

Any suggestions for how to approach this?

I answer this question over at Inc. today, where I’m revisiting letters that have been buried in the archives here from years ago (and sometimes updating/expanding my answers to them). You can read it here.

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