How to Negotiate a Raise
I always like to say that there are only three things you can do to change your financial situation: make more, spend less, or a combination of the two. But making more money can be easier said than done. It could mean finding a new job, gaining additional skills, or working more hours. Let’s dive into one way you can make more money: negotiate a raise.
Know Your Why
If you’ve been in SaverLife for a while, you’re familiar with my constant refrain of “know your why!” It’s important to go back to your fundamental goals and the roots of your financial desires. If you’ve been thinking about asking for a raise, is it because you don’t feel that your work is being sufficiently valued? Is it really about money, or is there something else going on at work that makes you feel undervalued?
What will this additional money do for your financial life and allow you to accomplish? Get specific! You can consult a pay raise calculator to see how a raise will change your monthly and annual pay. And don’t forget that earning more money may put you in a different tax bracket.
Know Your Worth
When you talk to your supervisor, you’ll need to present a reason you think you deserve more money – not just the reason you need the extra money. Have you been taking on additional responsibility, working longer hours, training other employees? Your pay should reflect your value to the company, so if you have more experience or responsibilities than you did when you were hired, it might be appropriate to ask for more money.
To start brainstorming about how you can frame this conversation, try doing a SWOT analysis, which helps you identify strengths that you can highlight. Make a few notes on the accomplishments you’re proud of, successes you’ve had at work, and the impact you’ve had on your team or company.
Here are some important questions to have answers for:
- What is the business case for increasing your compensation? In other words, how is keeping you happy beneficial to their business bottom line?
- What is the standard pay raise in your industry? Many industries have a standard of 3% annual raises.
- How does your pay rate compare to other companies in your industry?
Know Your When
Timing matters. If your employer is stressed or trying to finish a project, it’s not the best time to negotiate a raise. The ideal time would be after a big company success where you played a part in the positive outcome. And of course, a performance review is usually a neutral time to have this conversation. Your employer may even be expecting you to ask.
Know Your Bottom Line
Your employer may say no. What next? Have a plan for how you want to proceed. If you intend to stay even without the raise, ask what you need to do differently to get a raise in the future. What expectations are not being met? If you intend to leave if you don’t receive the raise, be mindful that you may need a reference from your current employer.
If you’re on the fence about asking for a raise, remember that you have more leverage than you might think. A survey from PayScale found that only 37% of workers have negotiated to increase their pay, but of those who asked for a raise, 70% received one.