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 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, playing the scene in one’s head is simpler compared to how it will actually go. The process involves both courage and, of course, skills in salary negotiation.
How often should one ask for a pay raise?
Many experts say that asking for a pay raise should not be done more than once a year. However, there can be exceptions, such as if the employer specifically said that salary would be discussed again in the next four or five months.
For example, an employee asks his boss for raise in January but is refused because of cash flow problems. If the boss states that they could negotiate a raise again after six months, then the employee can naturally look to negotiate again in July.
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, if a sales executive is able to close a multi-million-dollar deal, that may 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 important to consider the factors that most employers look at in order to gauge the necessity of granting an employee a raise. They include:
The proficiency factor largely focuses on the employee’s set of skills. 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 another factor. A company wants 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. A company is able to save money by 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 is in order.
Steps in negotiating a pay raise
How do we negotiate a pay raise?
#1 Choose the right time
Employers have a lot of things to think about. A worker who asks for a pay raise at a bad time is rarely going to get what he is asking for. The best time is during the regular 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, during a performance review is a good time to do it.
#2 Know your market value
Employees should research what other people who hold the same position in other companies in the industry are getting paid. The key is to know how much the industry is paying people who 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 his skills are bringing the company closer to achieving its goals.
#4 Go for more than just money
Although money is the ultimate aim, there are other things that one can negotiate for, such as a company car or a flexible work environment.
#5 Take your time
When there is already an offer, an employee should carefully analyze it, especially if it is not what is expected. A worker must determine if it is close enough to their expected result or if it is reasonable enough.
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.
Thank you for reading CFI’s explanation of how to negotiate a pay raise. 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: