The goal: Ask for and receive a raise, to increase your hourly rate or your annual salary.
In the study “Who Ask and Who Receives in Salary Negotiations,” researchers found that employees who asked for more salary increased their starting salary on average by $5,000. Over a 40 year career, a starting salary of $55,000 means $643,000 more earnings than a starting salary of $50,000!
$643,000! Think of all the wealth building you can do with that for just a little bit of effort now! That’s the 80/20 rule in practice. A little bit of effort now leads to a lot of good results!
The same principle applies even if you are already in your career! Negotiate a higher salary now and make more over the course of your career. Think long-term even if the per-paycheck amount is little.
Asking for more money is uncomfortable for many people, especially women. But here’s the good news: there’s a 75% chance you’ll get a raise if you ask for one.
Let’s prepare you to get that raise!
Prepare The Ask
Before you rush into the boss’s office, let’s slow your roll and do some prep work.
Did you know it costs a company approximately 20% of your salary if you quit and they need to replace you? Now, don’t threaten your boss with this information but it is something to keep in mind as you prepare your case for a new higher salary! It may well be cheaper to the company to give you more money than to let you leave and have to replace you!
You need to be able to answer why you deserve a raise. Not only do you need to know the why, but you need to be able to show your boss in a clear and convincing manner why she needs to give you a raise. The easiest answer for the boss will be no. Make it so that they cannot say no to you!
- Stats, Stats, and Stats: The most convincing reason for a boss is when you can show them that you have contributed to the bottom-line of the company. Can you show how you brought more money into the company? Or saved the company money? Identify these and bring the numbers with you. Present them in an easy to digest chart. Whatever you do, don’t under any circumstance don’t make up any numbers. You need proof behind what you are putting out there! If not, it could be grounds for termination – and that’s worse than getting a no after asking for a raise.
- Non-Monetary Contributions: You’ve probably helped the company out in very specific ways, even if you cannot quantify their value. For example, it may be difficult to show the value of your efforts to help train new employees. If you have helped improve team morale or gone the extra effort for customers, detail these efforts for you boss. Have you done more work with fewer team members or other resources? While hard to quantify the value, you employers knows the intrinsic value to the company. Ask for a financial reward.
- Show Why You Are Special: Do you have a skill set that no-one else on your team has? Especially if this skill set is mission critical or difficult to develop, then you have a great reason to ask for a raise. Have you received positive feedback from customers or superiors? Make sure that your boss knows about this and sees this feedback. Can you show years of experience on the job making your more efficient than your co-workers? Do you have any special licenses or accreditations?
- Make It About the Boss: Have you made the boss look good to his boss? What about to the customers? Have you contributed in a special way to the boss’s goals? Clearly identify ways that you have helped the decision maker in the past 1-2 years. Play up how you have contributed to their success. Ego is a strong motivator!
- What’s Next: Here’s a hidden trick to asking for a raise. Make it all about the future! Do you have big plans for the company in the next six months? Can you convince them that they need to reward you in advance of these efforts? Are you taking on new responsibilities at your job? Show the company that you have a long-term plans to help them. Use your past results to show how you will perform in the future. Make it all forward looking.
- Know When to Ask: Every company has a budgeting cycle, even if it is only an informal process. It could be based on a calendar or fiscal year-end. It could be some other point in time. Know when the best time to ask is. Obviously, job performance review time is a great opportunity since it will be on everyone’s mind. But at the same time, everyone will be asking for a raise then too. If you can find another opportunity to ask, then take it.
It is also important not to ask when you know the company is going through turmoil (except in special circumstances where you are so valuable that they must pay you more to stay on). You are also more likely to get a yes if you ask when the company is doing well. A great time to ask is after the successful completion of a project when everyone is feeling good.
- Know Who to Ask: Also important is to make sure that you ask the right person. Who has the authority to give you a raise? Is it your boss or your boss’s boss? Is it someone else in the chain of command? Know who to ask and if not your boss, can you get your boss to advocate for you?
How Much of a Raise?
Before you walk in that door, you need to know what you are asking for. How much more money do you want? Sure, you can leave it up to their discretion, but here’s the kicker: if you do that, you are more likely to get no raise! Make sure that your ask is in line with the reasons and your contribution to the company.
The U.S. Bureau of Labor Statistics said that labor cost (wages and salaries plus benefits) increased 2.2% in 2016. Did your salary and benefits increase by at least 2%? Make sure you are keeping up with inflation and receiving the benefits due to you!
Historically, the rule of thumb has been a rule of thirds – for every dollar a company makes, one third goes to salary, one third goes to overhead, and one third goes to profit. Under this rule of thumb, you need to be able to show that your value to the company is three times your salary.
In some professional service industries, salaries can account for as much as 50% of the revenue (1:2 ratio). In others industries though, the ratio is much less. Bars, restaurants, and much of retail have ratios closer to 1:5, meaning that salaries account for only 20% of the revenue. In those circumstances, you’ll need to show that your value is 5 times your salary.
And these ratios include your total cost to the employer – taxes, insurance, retirement benefits, and more. It’s not just your salary. Of course, these are also averages or guides. If you can justify why you should get more than the average, then go forward with the additional ask. And remember, it is an opening volley in the negotiations.
Bottom line, your ask should be reasonable!
Meeting With The Boss
After you have prepared your case and know what you are going to ask for, it’s time to meet with the boss, preferably face-to-face.
By meeting face-to-face, you can read your boss’s body language for clues as to what they are thinking. You can adjust your pitch based on how they are responding. In addition, it shows your boss that you are not intimidated by the discussion and would be able to even have money discussions with customers. Don’t hide behind an email discussion or a phone call, unless it is just impossible. Impossible would be for those where the decision makers are not in your office or you do not work at the office.
Be confident in yourself, your value and you contributions! During the meeting, keep it professional and stay away from extreme emotions. But don’t be a robot, show the boss that you care about this company and this job. It’s a fine line but by walking it in a professional manner, you’ll show that you deserve the raise you are asking for.
Much has been written about the pay gap between men and women. The American Association of University Women estimates that the pay gap won’t close until 2152! But don’t let this be an excuse to keep you from asking for more money! For women, especially, there is a lot of room for asking for and receiving a raise!
Now it’s time to put your plan into action – start and end with the goal in mind. The goal being to get more money, of course.
- Ask for the Raise: My recommendation is to start the conversation by telling them why you are meeting with them. Don’t leave them hanging or wondering why you are talking on and on. They will get distracted. So let them know up-front that you would like a raise and then lay out the reasons why.
- Tell Them Why You Deserve the Raise: Don’t assume your boss remembers everything you did for the company or why you are such a good employee. Highlight the cost savings and additional revenue you have brought to the company, as well as other special factors. Make sure that the boss is aware of your contributions to the company. But keep it to the highlights – don’t drone of forever on one project. You are more valuable than just one project! Show the boss the projects you are working on that will help the company in the future! The more revenue you show, the more they can pay you!
- Show Them The Math: This is where you will tell the boss exactly how much you are requesting in additional salary or hourly rates.
- Show Your Excitement for the Future: Stay positive and let them know that you see a long future at this company and how you want to continue to contribute to the company’s success.
Now here’s the key – don’t expect an immediate answer! Don’t be disappointed if you don’t walk out of the meeting with a raise. Your boss may not have the authority to grant you the raise unilaterally. They may have to take it to a greater committee or someone else. Your boss may also want time to go over your information and/or consider other important concerns that you may not be aware of. Are they going to add other staff? Is some super new benefit package in the works that will increase the company costs?
Now, if you don’t hear from them within a week, at least a status update to say that the company is considering it, then follow-up with the boss. Make sure it is in a very professional manner without demanding an answer. Remember, the easiest answer for the boss is no.
What To Do If You Get A No
So not all salary negotiations will lead to a raise. It’s disappointing for sure. But you can use the no to lead to new opportunities.
Start by asking your boss if they can explain why. Perhaps it is not in the budget for this year or other reasons beyond your control. This may be a good time to ask for something else. Some other options that you can ask for:
- Bonus: Depending on the budget structure, you may be eligible for a bonus, but not a salary increase. It’s a one-time benefit instead of a recurring benefit. But it still helps to take away the sting. And you get it all at one time.
- Flexible Work Hours: this could lead to more time at home with the family or to opportunities to start a second job or side hustle.
- More Vacation Days: We all deserve a little time off from work. Again, these extra days could mean more time for a side hustle or more time to focus on other personal financial issues.
- Better Working Conditions: Is there something about the current working conditions you don’t like? If you work in an open-office design or a cube farm, a private work environment that will allow you to better focus on your work would lead to a better work product and perhaps even a future raise. Ask for the change.
- Other Benefits: Does your company have the opportunity to take away some of your expenses? Perhaps pay for your cellphone service or provide a company car? Maybe they can reimburse you for a new degree or other on-the-job training that will make you more valuable in future salary negotiations.
Finally, if you are still at a no, ask what you can do in the next six months to improve your chances of getting a raise. Ask the boss to define her expectations or identify what it would take to get a raise. Then work that plan! Come back in six to nine months and see if you can get a raise. Sometimes, a delayed win is still a win!
On the other hand, maybe it is time to ask for a promotion to get more pay or to even start looking for a new job!