How High of a Pay Raise You Need To Fight Inflation — And How To Ask For It
As inflation and cost-of-living expenses continue to soar across the United States, workers are stepping up and asking for pay raises to offset costs. Exactly how much of a salary increase should an employee ask for and how can they prepare to make this ask in a way that advocates their worth? And, if you ask for a pay raise but do not receive it, are there any alternative financial options available to employees? Keep reading to find out the answers to all your questions.
How Much Should You Ask For?
Jay Zigmont, Ph.D., CFP and founder of Live, Learn, Plan, said inflation itself is not a reason for a raise. An employer will try to pay market rates. Essentially, a market rate is the median base salary employers pay to employees who work in specific types of occupations in certain areas or cities.
“If your job, in your area, is within the market rate, it is going to be rare for an employer to pay more,” Zigmont said.
The good news is that employees may leverage data to their advantage. Zigmont said if employees have data that says they are paid below the market rate it may be persuasive to employers.
Joe Mullings, career expert and CEO of The Mullings Group, said asking for a cost-of-living adjustment (COLA) has not been a standard workplace behavior among those in the professional ranks. However, this standard has gone out the door since the start of the COVID-19 pandemic. While most demographics may ask for a pay increase, those hit hardest by COLA changes are new graduates and entrants into the job market. These individuals have less in savings and are paying an outsized percentage of their salaries for rent, resulting in an environment where new hires are under considerable personal financial strain. In turn, this may impact their work performance or force them to look for a higher-paying job.
An employer can wait for the employee to collect data that makes a case for their pay raise, or they can take action and start implementing changes. Mullings said organizations would be smart to stay ahead of the ask and have COLA adjustments made to the early career entrants in the workplace.
How To Ask For a Pay Raise
Ready to ask for or negotiate a pay raise? Megan Leasher, Ph.D. and chief solutions strategist at Talent Plus, shares which next steps to take with your ask.
Know Your Value
Similar to conducting research on market rates to determine if you are being paid the proper rate, Leasher said employees asking for a pay raise must know their value and demand it. This is especially true of women in the workforce who depend on salary transparency to help close the gender wage gap.
“Being unaware puts people in a place of lacking the right information to arm them to ask for a raise. Being afraid to demand it puts women in a place of shying away from confidence and accepting less than the value they bring to an organization,” Leasher said.
Consider the Timing
The present economic landscape aside, timing is often the primary decision maker when asking for a pay raise. If you aren’t careful, asking for a raise at the wrong time may inadvertently shut down your request.
Leasher recommends keeping the following timing considerations in mind as you prepare to make the ask.
- When do annual reviews, bonuses and/or raises tend to take place? It may be to your benefit to have the conversation prior to these moments.
- When does budget planning take place within your organization? Similar to reviews, plan to have the conversation prior to these plans.
- When does your organization conduct a thorough review of its KPIs or host board or shareholder meetings? Leasher said it is critical to be sensitive to the timing of these events.
For those ready to start negotiating, Leasher recommends starting big.
“If you don’t start big and ask big, there is 0% chance of a big outcome,” Leasher said.
It may be scary to ask for a big number, but Leasher said asking big helps open the dialogue and prepare for the possibility of an initial objection. Remember that an objection is not a rejection. Rather, it is part of negotiation.
“You have opened the dialogue,” Leasher said. “Have your thoughts gathered in advance regarding how you would want to respond next.”
Leasher recommends having a plan before you receive the objection. If you are told no to your big ask, remember that the objection is part of the dialogue. Will you be able to come back and propose that your big number is reduced by 10% or 20%? Be open, willing and expect to bring the number down.
What If I Don’t Receive a Pay Raise?
Let’s say you carefully planned for negotiation, conducted data research, followed timing considerations and the answer to your ask was still no. Do employees have any other options available to receive the pay raise they need to fight inflation?
The answer is yes. Mullings recommends employees ask to have their performance review on a six-month cycle instead of the standard one-year cycle.
This is an especially savvy move for employees early in their careers. Mullings said employees may make the case that they are enjoying their role in the company and are learning a lot. However, the review process is not keeping pace with the rapid rate of change in today’s economic environment. The employee may explain that they want to focus on their work and not be distracted by running out of cash to pay the bills and ask for consideration of an early merit review.
Another possibility is to check in and see if your company offers semiannual cash bonus opportunities. If you receive an annual bonus, Mullings said a semiannual cash bonus may supplement your annual take-home compensation.
Employees who don’t receive a merit increase and still need a significant pay raise may be able to secure a raise by changing jobs.
“It is an unfortunate fact that companies are often reluctant to give you a considerable raise if they are used to paying you less, but a competitor might see your value differently,” Zigmont said.
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