How to negotiate a higher salary

Dear Evil HR Lady,
I have a co-worker who has the same position as me. We are key personnel in the organization. Losing either of us would be a devastating blow. She approached a competitor and went through an interview process. They offered a substantial salary increase. My co-worker told me she had no intention of leaving, she just wanted to increase her salary. She did not threaten to leave, she just told our manager that she had a competing offer. My current employer did not hesitate and matched the increase, and offered $5,000 on top. My co-worked accepted our company's offer. This puts her way ahead of me in salary. I know this because she shared all the details every step of the way.

I really like my current employer and have worked here for over 10 years. I have seen many in our company do this in the past, with positive results and little ramifications. In fact, my company is notorious for giving very meager pay raises at review time. Salary increases outside of an annual review are NEVER discussed except when someone threatens to leave.

How do I approach the situation? I felt slightly underpaid before this happened, and now I feel grossly underpaid. I let it slide because I like my job, the people, and the work is secure and steady. I just had my review a month ago, so waiting until review time will be an 11-month wait. Do I seek out my own offer and pull the same trick? I am 100% sure they would counter offer me as well. Or do I approach my employer now and just flat out ask for a raise on the heels of this affair? Should I tell our manager that my co-worker told me of her raise and I want one too? I feel like anything I do should wait until this situation cools down.

Your company is engaging in a phenomenally bad compensation strategy. Instead of judging the employees based on the worth to their company, they judge them based on their worth to another company. That's just stupid and cheap.

But, you're not the policy maker, you're just stuck with the situation. It is absolutely unfair that you are being paid substantially less than a co-worker for doing the same job. (Not that salaries between co-workers shouldn't vary, they should and they do, but that should be for internal reasons, not because someone got a job offer.)

More on Money Watch:
Why it doesn't matter that your coworker makes more money than you

My question is, you know that your employer is treating you unfairly and that another company would offer you more money, so why stay? I know you are going to say that it's because you like your job, but that's a lie because you don't like being treated this way.

Many people who claim they are underpaid couldn't get another company to pay them more than they are making now, which means they are not underpaid at all. But you can (presumably -- I'm taking your word for it). So, what is it that is keeping you there?

If it's the length of service, nowadays long tenure isn't as appealing as it used to be. It used to show loyalty, but now people tend to think that you stayed for so long because you couldn't get anything better. Doesn't matter if it's true or not, it's the general mindset. (Movement within the company, however, can counteract that "couldn't get a job elsewhere" attitude.)

So, figure out why you are really staying and then decide if being treated poorly is worth it to you. It may be. For instance, if another company would require a longer commute, or you get lots of vacation here or they allow you the flexibility you need for your family, the low salary may well be worth the tradeoff.

If you decide that it isn't worth it to stick around, then look for a new job, find one, take it, and resign. Don't ask for a counter offer because you've made the decision to leave already and don't let them woo you into staying for 10 more years of bad increases and not being recognized for your hard work. No point.

If you decide that you do want to stick around, go head and approach your boss. Don't bother getting a new offer and don't say that your coworker never had any intentions of leaving. First of all, the new offer is silly and secondly, never tattle on your coworkers for things that aren't problems.

Try this: "Boss, I know Dianna just received a large increase as a counter offer. Our jobs are very similar. I have no desire to leave this company and I like working here. However, I am a very valuable asset for this company and especially this department. I'd deserve an increase to $X. What do we need to do to make that happen?"

Now the reality is, it may be senior management or HR (and probably both) who don't allow increases without a competing offer and your boss may say that. Or it may be that it's your boss who is cheap. Or it may be that your boss will say, "Gee, you're right. Let me see what I can do," and you'll bet a raise.

If the response comes back that they won't give you a raise without an offer from a competitor, then I strongly suggest you go find a competitor (perhaps the one your coworker turned down) and get a new offer and leave. Because this company will never have respect for its employees and you really don't want to spend the rest of your life working for a company and a boss who does not respect you. Your coworker has a raise now, but if she sticks around, she'll have to go through the same rigamarole again to get another raise in a few years.

Have a workplace dilemma? Send your question to [e-mail].

[CarolSchultzCO]

There are items in both the author's response to the question, and the comments, I'd like to respond to. After spending 16 yrs in executive search and now 4 yrs as a management consultant training and advising companies on talent strategy and individuals in the area of career, I believe I have the knowledge and experience to provide insight into this conversation.

First, I should confess to being no fan of HR. I think, for the most part, they live in a black and white world and don't truly understand recruiting and retention issues faced by companies. There are a multitude of reasons for this I won't bore you with. That said, the author makes some sensible suggestions. Here is what's missing from her argument:

1. The "right" length of service at a company depends on who's evaluating "right". Yes, long time service isn't thought of like it used to be. But is 2 yrs enough? Or 3 yrs? Or 5? Or something else?
2. Loyalty: I have said for years, "Never be loyal to your company beyond the point at which it suits YOUR needs." When the shoe is on the other foot companies won't think twice about pink slipping you if it's in their financial interests.
3. This advice, "Boss, I know Dianna just received a large increase as a counter offer. Our jobs are very similar. I have no desire to leave this company and I like working here. However, I am a very valuable asset for this company and especially this department. I'd deserve an increase to $X. What do we need to do to make that happen?" is the worst advice ever in many ways. First, you put yourself in a situation where the company now sees you as a possible fidelity risk. (I wrote an article a while back that applies here: http://www.ere.net/2011/05/24/why-you-and-your-candidates-should-never-accept-a-counteroffer/). You put yourself in a very weak position by demanding the same as someone else who had to get another offer just to get a raise. Very sleazy on both parts. If you want more money after the fact you need to approach your boss and tell him why you want more money and give specific examples (your value to them) of why you want a raise. What someone else gets is irrelevant. As @dvd3762 said, your counterpart may get fired for delivering confidential information to you. I'd certainly get it on the record with the "talker" and warn her that should something like that ever happen again she'd be out of a job.
4. I will assert the person who has been there for 10 yrs doesn't want to leave because she's afraid that the new job she takes will be unstable in our current economy. Remember that just because she has 10 yrs with them does not guarantee they'll keep her. I'm sure all the lifers at IBM that were let go in the early 90s thought they'd have a job for life too.
5. @denmason100: you are right on target in your comments and assessment
6. Finally, why in the world would anyone want to work for this company???

[dvd3762]

Bad idea. Most companies will one or a combination of the following:

1) Peg you as a whiner who is working to leverage them rather than demonstrating objective performance-based reasons for a merit increase.
2) Potentially discipline or fire you and/or your compatriot for sharing most likely confidential salary information with a coworker.
3) Never perceive you the same unless you present the issue completely based on your own performance-based merits.

You should go for it, but BE CAREFUL. Oh, good luck.

[NonPC]

Here's something else: do you REALLY know that this person is telling you the truth?
Sick as it might sound, they could be playing you to THEIR advantage.

I know. This bites. But the cat's out of the bag any way you look at it.

Shows you that ignorance is bliss sometimes. This will wind up eating away at you no matter what you do. Sorry to hear about it.

My advice: forget about it or start looking.
10 years probably means you've wracked up (hopefully) some good vacation time.
Figure out what that's worth to you and go from there.
Good luck!

[dgddave]

Ok, first off, I have been around this block many times, with large and small employers. Although I am sure the author has good intentions, this article is filled with just plain bad advice, particularyl in this current economy.
Whether or not you agree with the company's hiring/retention/raise strategy based on equity concerns is irrelevant. The observation that this particular company's strategy is "stupid and cheap" fails to appreciate that almost all private and some public (local and federal government) employers are currently forced into this strategy given the budget constraints we are all facing. Without sounding cold-hearted or ruthless, this strategy is the cheapest and most effective way of keeping the good apples and letting the dead weight float away. First, if you truly are impressive and valuable to your employer, your resume and accomplishments will reflect this and a competitor employer will certainly make you an offer that you can take to your current employer and use that offer to obtain a raise. The strongest truly shall survive and get another offer that will in turn allow them to stay with their current employer if it is matched. If you think just because someone else got a raise, you should too, put your money where your mouth is: go out and do the same thing instead crossing your arms and screaming foul. Companies and local governments are losing money left and right in this economy, they can't open the floodgates in this situation. You have to prove to the company you are actually worth the retention raise. Companies don't have the resources to do indivual merit based raises in this economy, you unfortunately have to do the work for them and go out there and show them you are worth more than what they are paying you. This strategy isn't "stupid or cheap", it's actually smart and effective. It shifts the costs to the employees who feel strongest about it, that is, the ones who incur the least amount of transaction cost in demonstrating they are worth more than what they are currently being paid. It is also very effective in that it has a third neutral party perform and incur the costs of doing the analysis of whether or not the employee is worth more than what he or she is currently getting paid.
The days of annual 5 to 10% raises as a given are long gone, and will be for sometime. Rather than advise people of what the reality is, this article suggests that the current company is in the minority and has bad human resource practices when nothing could be farther from the truth: this is the mainstream process now and actually is effective. The reason why the other employee got a raise is because he or she demonstrated there was someone else out there willing to pay the employee more. If the other employee can't do this, then that employee simply isn't worth more than what he or she is getting paid.
I am also not sure how helpful the advice at end is: that is you should "stick" it to the current company by leaving or resiging if you get another offer AFTER they tell you they need a competitive offer to give you a raise. Your assuming this person can get a competitive offer. If the person could, then why not simply do what the company asks, demonstrate you are worth more than what you are being paid and do so by the people who can do it at the lowest transaction costs: a third party employer looking to fill a position who is interviewing many candidates and the employee who is not happy with his or her current pay.

[Denmason100]

As an employer, I would take some issue with the statement " It is absolutely unfair that you are being paid substantially less than a co-worker for doing the same job". As proof, I have a number of workers who do the same job (title anyway) but their value to the organization can vary significantly. There are huge differences in performance, effort and success (and I make a big distinction between effort and success).

None of those issues were addressed by the writer. A much better way to get what you want is to make a case for how your work impacts the bottom line. That rarely has anything to do with what a co-worker makes.

Different levels of compensation has little or nothing to do with how much an employer likes or respects an employee (although the more you succeed, the more you will be liked) and almost always has to do wtih how much value each employee brings to the table.

[jwhitesls]

Denmason100.....thanks for your ideas. You are right on the money. The above article and the advice it offers are pure HR fluff.The article focuses on "doing" the job rather than achieving the results required by the position. Instead of focusing on all this good feeling nonsense have the employee sit down with his manager and together set up a compensation plan based on the results the employee needs to achieve. Isn't that how the HR department functions?????