If you think you deserve a raise, now is a good time to go to your boss. Employers are increasingly struggling to find qualified workers, with many raising their pay to fill open positions.
In 2021, a record number of workers quit their jobs in what has become known as the survey found that workers quit over low pay and a lack of opportunities for advancement.. A Pew Research Center
The current labor shortage gives workers leverage in the job market, especially as remote work has opened up more opportunities. That makes it a good time for people who believe they should be making more money to ask for raises.
Workers also have another advantage: It's typically more costly for your employer to replace you than to hike your pay.
"The hiring process is very lengthy and costly, and with the labor shortage it's in the employer's best interest to retain the people they do have," said Nicole Victoria, a money coach and author of a forthcoming book on financial advice for millennials. "It's easier to retain an old employee, and if you're a good employee it becomes an easy sell for you."
Here are tips on how to successfully negotiate a higher salary.
Showcase your results
Replacing workers is costly, given the time and resources companies expend interviewing and training new employees. Inevitably, there will be a period of time during which a new worker will not be as productive in the role compared to someone who is more seasoned.
"Keeping the same person could have higher productivity, higher profit margins for company, so overall it's in their best interest to try to keep you," Victoria said.
But if you want a raise, be prepared to demonstrate your value to your employer.
Start by performing a self-review, evaluating your performance over the past six months or a year. Highlight how you've made your company more profitable or otherwise added value to the organization. Victoria even recommends coming prepared with a handout that provides these kinds of metrics.
"Showcase your results, what you've done and what it means for the company or your boss. Sometimes your employer doesn't realize all the things you're doing," she said.
Know your compensation range
It's OK to ask your peers what they make to determine if you are underpaid given your role and duties. Also consult with more senior mentors on what they think your salary range should be.
"Pay transparency should be discussed among all employees," said Nick Meyer, a certified financial planner who shares. "It's important to know what you're getting paid in comparison with your peers, because that's an argument you can use with your manager if you're grossly underpaid compared to people who are doing the same work as you."
Asking co-workers about their salaries is also perfectly legal.
"It is not illegal to ask others what their salaries are. This is a good way to gauge whether or not you're in line with what the company generally pays for your position," said Bill Simonet of Simonet Financial Group, a wealth management firm.
Also refer to sites like Glassdoor to gain a sense of what fair compensation is in your area for your job title and industry.
"Some industry organizations publish reports with compensation ranges for different positions and experience levels. You can take these to the meeting with your manager — know where you fall as far as your job responsibilities and experience. Another option is to find out what other companies are paying for lateral positions," said Hannah Szarszewski, founder of Blue Mountain Financial Planning.
Seek a competing offer
You may have additional leverage if you present your boss with a competing offer at the salary you desire from another firm.
"Prior to the meeting, get an offer from another employer. Tell current employer you would love to stay, but that you will need them to match the other offer. If they don't, take the other job," said JP Geisbauer, principal at Centerpoint Financial Management.
"It always helps if you have applied for other jobs and have a competing offer even if you're not thinking about leaving," Meyer added.
Make it about them — not you
Inflation is at a 40-year high,. But your own increased cost of living should not be your main argument for a pay adjustment.
"Mentioning inflation as a reason to increase compensation is fair, but you'll likely need more reasons than that because everyone is experiencing inflation. So it doesn't make any one person stand out from their peers," Szarszewski said.
In other words, your employer cares about how your work affects the organization, and less about your own costs like rent or car payments.
"Gather all the things to show somebody why you're asking for that compensation raise so you're not just saying it is costing me 10% more for my rent so you should pay me more. Maybe that will work, but it's kind of flimsy," said online financial adviser Katie Brewer.
"Don't say my car payments are going up or my mortgage is more expensive. Go in and say, 'Here is what I've done for the company, here is how I've helped increase profitability metrics,'" Victoria said. "Put a number to everything if you can, talk about the value you bring to the organization. Those are the things that are going to make them want to keep you, versus telling them how it's going to benefit you."
If there isn't room for the pay increase you're seeking, consider how else you'd like to be compensated.
Said Victoria: "Negotiate on other points as well, like increased contributions to your retirement plan, the ability to work from home or an extra week of vacation. Think about what you want, and ask for things that are most important that are of no extra cost to the company but are of value to you."