When it comes to money and improving your finances, most advice tends to focus on cutting out unnecessary expenses from your lifestyle and consistently saving each month. But there is also one other important component that is usually ignored – increasing your income.
It might just be the Millennial in me, but I think the times of 3% annual raises or one extra vacation day accrued each year should be left in the 20th century. With inflation on the rise and most salaried employees working 50+ hours a week, it is vital that you are properly compensated for your time, experience, and expertise.
Here are the steps to take to negotiate for a raise at work:
Accept that you deserve it
There are a variety of reasons why you might be “underpaid”, ranging from your years of experience, skills, or location where you work and live. For many people (myself included), we were taught to be thankful that we had a job and although everyone dreams of making more money, only the entitled and greedy actually ask for it. This is simply not true.
Whether it’s your first job out of school or you are returning to the workforce, chances are that you accepted a job offer for less money than you would have liked. According to a survey by Robert Half, 46% of workers feel that they are underpaid. The realization might come weeks or months later, but once you accept that you deserve a raise, the thoughts will continue to linger until they are addressed.
Research pay scales
When it comes to compensation, a little know fact is that most jobs have salary bands. A salary band is a pay range for a position that is determined by a company. Although it may be considered taboo, California and New York City legally require employers to disclose the salary band to prospective candidates, but only if they ask.
If you are planning to negotiate a raise or promotion, then your employer will look at the pay scale set for your position. A pay scale provides both minimum and maximum amounts for a given position at your company.
If you’re not sure where to start, there are some online resources, such as Glassdoor and PayScale that can provide you with general industry and sometimes company-specific salary and benefit information.
Decide what you want
After accepting that you deserve a raise and knowing the pay range for your position, you will then need to decide how much income you want. While it can be tempting to demand the top of the scale, you will need to be realistic and also flexible.
For example, let’s say that your current salary is $85,000. Based on your research, the pay scale for your position is $80,000 – $105,000. While you might ask for $105,000, you should be prepared to settle for $90,000 – $100,000.
Don’t be afraid to push back. We’ve all been told that there is “no room in the budget” or “now is not the right time”. You should also be prepared to negotiate for other benefits and perks besides salary. This can include target bonuses, equity (like stock options or RSUs), unlimited paid time off, working from home, or continuing education benefits. If your employer is not willing to budge on salary, they might be open to a bonus structure linked to your performance or revenue goals.
Have the conversation
It might feel like you’ve already done a lot of leg work, but the real challenge is yet to come: approaching your boss and pleading your case. This can prove to be very difficult and sometimes awkward, especially if you have a friendly relationship with your manager.
Be prepared to answer the following questions:
- Why do you deserve a raise?
- How have you exceeded the expectations for your position?
- What are your long-term career goals and expectations?
While your boss shouldn’t be completely surprised by your request, you should also be expecting a counteroffer from them. Continuing with our previous example, your boss might counter your ask at $88,000 or $90,000. At this point, you need to be willing to come down from your initial ask and settle for somewhere in the middle.
Increasing your income and getting paid what you’re worth is important for both your short-term and long-term financial planning. If you would like to work with a financial planner to walk you through your options, I would love to help you!
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Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.