Many of our professional clients ask us for advice on how to negotiate a pay rise.
It is one of those topical areas that everybody is interested in but no-one seems to talk about.
So Let’s Talk …
There is no doubt that negotiating a pay rise with your employer is a sensitive and difficult thing to do. The cynic in me would argue that employers WANT to make it a difficult issue to approach, as it’s not generally the type of discussion they want to have. At the end of the day, unplanned increased wage costs potentially blow out their expenditure budgets and may ultimately reduce company profitability.
So your challenge is this – how to put forward a convincing argument as to why they should be paying you more than they do now.
To assist us to delve into ‘convincing arguments,’ it is important to understand, or refresh ourselves on, what employers typically consider when assessing pay rise requests.
EMPLOYER CONSIDERATIONS ARE:
1. your performance over the past 12 months (and possibly longer);
2. whether they think you are a ‘keeper’ or a ‘superstar’ performer and someone they plan to promote later;
3. whether they see your role as ‘key critical’;
4. your job gradeor band (in larger organisations) or the perceived value of your role (in smaller organisations);
5. the performance of the organisation as a whole;
6. how your pay compares to the current market;
7. how your pay compares to your peers internally; and
8. how difficult it would be to replace you if you left.
The 8 points above provide hints on how to evaluate:
1. whether it is sensible to ask for a pay rise; and
2. how to construct your ‘convincing argument.’
Let’s look at each in a little more detail –
It is sensible to assume that most employers are keen to keep their outstanding performers happy and engaged. This makes good business sense. If you have received excellent performance feedback (in terms of behavior/attitude/achieving your KPI’s) then you are in a better position than many to consider requesting a pay rise.
If you know your organisation sees you as someone to promote or develop, this is a good place to be coming from when asking for a pay rise. If your employer is conscious about the ‘war for talent’ then they won’t want to lose you. But a word of warning here – not all employers are tuned in to talent shortages!
YOU ROLE’S KEY CRITICALITY AND HOW DIFFICULT IT WOULD BE TO LOSE YOU
Some roles in organisations are seen as ‘key critical.’ This means that it would seriously hurt the organization for the role to be vacant at any point in time. In my experience, only a few roles fall into this category (e.g. a project manager with extensive knowledge on a project no-one else has). Be careful not to put yourself into this category without a very good reason. However, should you be in a ‘key critical’ role, you are definitely in a better position than most to ask for a pay rise.
YOUR JOB GRADE
Many larger organisations group roles into bands, grades or job families based on their position descriptions (duties, accountabilities or responsibilities). These groupings often have pay levels (or steps) based on length of experience, service or expertise. If this system exists within your organisation, it’s important to know which grouping you fall into, and whether in fact you are applying to go up a pay band/grade or actually enter a totally different one. If you are at the top of your pay band/grade, then odds are asking for a pay rise is futile. You are better off requesting a job evaluation to make sure you are in the correct job band/grade for the role you are performing, and then go from there. These internal systems exist as a way for organisations to try and maintain some fairness and equity in their pay practices. A useful comparison for you is to see where your peers fall within the system, although this isn’t always easy information to obtain.
YOUR COMPANY’S PERFORMANCE
It is vitally important to understand your organisation’s climate prior to asking for a pay rise. If they have just cut budgets, downsized staff, announced a recruitment freeze or released a shareholder statement re reduced profits or dividends … it’s probably not the time to be asking!
YOUR MARKET RATE
It’s also worthwhile understanding your own market value. What are others performing similar work outside (and within) your organisation currently being paid? How does your salary compare? You can conduct your own research by talking to recruitment consultants within your area of expertise, or by talking to your local industry association. Be careful when reviewing market rates because factors such as geography, experience level and organisational size can make a significant difference to salary levels. Also make sure you compare ‘apples with apples’ when it comes to salary packages e.g. does the market rate include superannuation, motor vehicle usage, bonuses and health care? Lastly, do not fall into the trap of thinking the same job title means the same work!
YOUR PEERS’ RATES
As mentioned above, this isn’t always easy information to access. But it is one factor that employers consider when assessing your pay rise request. If you are being paid significantly less than the new person they just hired or promoted, then you may have a better case for a pay rise – all else being equal.
If the above isn’t enough to help you understand the complexities of pay rise requests, then also consider the following:
YOUR COMPANY’S REMUNERATION PRACTICES
Take some time to understand your company’s remuneration practices. This includes understanding annual time-frames and managerial authority. Some companies only review salaries annually. It may be difficult to get them to review your pay at any other time, no matter who you are, how well you perform, or how poorly you are paid. Other companies are open to discussions throughout the year.
Understanding how budgets work in your company and what authority/approval your manager has over the process will better position you to argue your case for a pay increase.
AND SOME FINAL TIPS …
* Be open to meeting your employer ‘half-way.’ Some employers may agree that you deserve a pay rise, but due to departmental relativities or budget considerations, they can’t give it to you all at once. Be prepared to accept incremental increases over a period of time, or a further review at a later date.
* Never give your employer an ultimatum. You may find yourself backed into a corner you can’t get out of and suddenly unemployed.
* Stay calm and professional. Don’t whinge to your peers about how underpaid you are! Remember – throughout this process you want to be seen as a ‘keeper.’
* Lastly, prepare for the discussion. Make sure your facts are indisputable.
At the end of the day, your employer has a lot to consider in granting your pay rise request. It is a complex minefield for them, so take a deep breath, behave professionally and be patient while they work through it.
Let’s Talk Career has 5 executive coaches with senior HR backgrounds. We have staff who can coach you through this, and other HR related issues that impact on your career from $250 + gst per hour (in person, via phone or Skype). Give us a call to learn more on (03) 8686 9102.
We would be delighted for you to reproduce our articles, as long as they remain intact and contain the author’s details as follows: ‘Kris Reynolds is a Melbourne, Australia based Executive Coach with Let’s Talk Career. Kris can be contacted at www.letstalkcareer.com.’