5 Ways to Negotiate a Pay Raise
Money, in the form of salary, is undoubtedly the highest motivating factor for every employee. Benefits and the environment where they work in follow. After staying several years at the same company, a worker will definitely start to consider negotiating for a pay raise not just as part of career growth but also to cope with inflation.
However, it is always easier said than done and playing the scene in one’s head is simpler compared to how it will actually go. The process involves a lot of courage and, of course, skills in salary negotiation.
How often should one ask for a pay raise?
Ideally, many experts say that asking for a pay raise should not be done more than once a year in order to achieve desirable results. However, there can be exceptions to the guideline, such as if the employer or boss specifically said that such matter would be discussed again in the next four or five months, which might still be within the same year.
For example, an employee asks his boss for raise in January to start the new year right but is then refused because of cash flow problems. If the boss states that they could negotiate his pay raise again after six months, then the employee can naturally negotiate with the boss again in July, which is the six months the boss was referring to.
Another exception to this unwritten rule is when an employee lands a very important account, which can potentially bring in a significant amount of money to the company. For example, a sales executive for a real estate company is able to close a multi-million-dollar deal with another company, then that should be reason enough to negotiate a pay raise.
Factors that affect negotiating a pay raise
Before an employee decides to talk to management to negotiate a pay raise, it is first important to consider the factors that most employers look at in order to gauge the necessity of granting an employee a pay raise. They include:
The proficiency factor largely focuses on the employee’s set of skills that are needed for his job. An employer looks at how a worker’s proficiency has improved through the years of doing his job at the company.
#2 Length of service at the company
The length of time an employee has been working in a company is equal to the amount of service he has given and the contributions he has made to the organization. It is why an employee’s length of service is one of the factors that affect negotiating a pay raise.
A company would want a valuable employee to continue working for it because he is already familiar with its corporate culture and the things that need to get done. In fact, it is also economical because a company is able to save money from not having to train a new employee to do the same job.
Every employee is expected to do his job because he is getting paid. However, when one works over and beyond what is expected and helps the company achieve its goals by doing so, then, a salary negotiation should definitely be on the way.
Steps in negotiating a pay raise
For the ultimate question of all, how do we negotiate a pay raise?
#1 Choose the right time
Employers have a lot of things to think about and a worker who asks for a pay raise at a bad time is never going to get what he is asking for. The best time would have to be during the pay review time, which is when most companies do it.
Some contractual workers usually negotiate upon signing a new contract or at the end of the fiscal year. Otherwise, the Performance Development Review is also a good time to do it.
#2 Know your market value
Employees should take time to ask other people who hold the same position in the same company or in other companies that belong to the same industry about how much they are getting paid and how much they are trying to negotiate for in the next year. The key is to know how much the industry is paying people who do have the same job.
#3 Have a strong business case
Negotiating a pay raise isn’t as easy as withdrawing money from an ATM wherein one can just input the amount and the desired amount comes out of the machine. It takes building a business case wherein one presents his specific contributions to the company and how these and his skills are bringing the company closer to achieving its goals every day.
#4 Go for more than just money
Although money is the ultimate aim, there are other things that one can negotiate for such as added benefits, such as gym membership, a company car, or a flexible work environment.
#5 Take your time
When there is already an offer, an employee shouldn’t just jump right into it without carefully analyzing the offer, especially if it is not what is expected. A worker must determine if it is close enough to the expected result or if it is reasonable enough.
The employer should be made aware that a bit of time to think is needed and assured that an answer will be made available at the soonest time possible.
Negotiating a pay rise shouldn’t be a stressful matter as long as both parties are open and possess a mutual desire to keep the relationship going. It is just a matter of knowing when and how to do it.
CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful: