Salary and job satisfaction surveys consistently show that many people in the workforce feel that they are underpaid relative to the value they bring to the company. Additionally, many studies of the workplace have shown that workers feel uncomfortable asking for raises, even when they know they are making less than co-workers with similar roles and experience. These problems are related and lead to many people being unhappy with their pay and lower overall job satisfaction.
In fact, many people are so reluctant to ask for an increase in pay that they instead turn toward second jobs and side gigs to meet their income needs. In this article I’ll be offering some tips on how to get the most out of your current job, the right (and wrong) ways to ask for a raise, and tips for exploring the market and knowing your value in the workplace.
Get the most out of your current job
Getting more (money) out of your job can come in many different flavors, some more relevant to hourly employees and some more relevant to salaried employees. If you are an hourly employee, you typically have 2 options for increasing your take home pay:
- Increasing your hourly wage
- Increasing your hours
I know, I feel like Captain Obvious when I type that, but it is amazing how many people don’t full grasp that is how simple it can be, especially if you are working for a larger company. Let me explain why.
For most companies there are pay bands for each position/title. That means that not everyone with the same title makes the same amount of money, but instead are just close. For example, an entry level customer service worker in a big box store may make $11.50-$13.50/hour, and there may be a lot of manager discretion within that band. Where you are in that band may not be related to performance on the job, but with when you were hired, what you made at your previous job, and which person in HR reviewed your application. Additionally, the faster you get to the top of the pay band, the faster you will need to be promoted, so moving up, even incrementally can pay off through time.
For many companies the cost of training new workers on the job means that it is better to have fewer workers that work more hours. If you are currently not working as much as you like and you want to increase the size of your check be proactive and ask for more hours – and push hard to get them consistently. The squeaky wheel gets the grease, and managers want/like employees that are keen to work. Also, don’t be afraid to ask for overtime. Since overtime is typically paid at 1.5x your normal wage, the dollars will add up faster.
There is also the option to get creative depending on your position. If you do sales, can you potentially earn a commission or get a bonus for exceeding targets? The worst your boss can say is, “No.”
For salaried employees I feel like there are more options, especially for those who work at large companies. Your options include:
- Increasing your base pay
- Increasing your bonus targets
- Inclusion in stock and option plans
- Increases in commission rates
Most salaried employees also live within pay bands for their position/title. And a big secret that many companies won’t tell you is that pay bands actually overlap, so that, for example, a Customer Service Rep I may make the same salary as a Customer Service Rep II. However, the person with the higher title will still take home more because they will be in a higher bonus pool, they will receive larger share/option grants, and they will be more likely to get better raises because they will have more room within their pay band.
Strategies here are to ask for a combination raise/promotion, in which case you get the best of both worlds. Alternatively, you can ask for either separately. Since most managers watch their salary budgets closely with a focus on the headline base pay numbers, you may find that you can get a promotion while staying at the same salary level. Although this may seem pointless, it will give you access to the higher bonus pools and potentially to more stock/options if your company has those plans. Although off cycle pay raises may be more difficult for managers to accommodate, once again, the worst they can say is “No.”
The other way that companies can give more to workers is via grants of company stock and options. Although these are often continuous plans, many companies have pools of stock that they can use for one-off grants in special cases. If cash isn’t an option, maybe a stock grant is something your manager could swing.
How to ask for a raise
The right way to ask for a raise or promotion is to do it professionally. This is business and you to treat it as such. You should go to your manager with an updated copy of your resume/CV, copies of performance reviews and any goals that were set for you, a list of your key responsibilities, and areas where you have had a positive impact that can be tied to the bottom line or positive outcomes. You need to make the argument for why you deserve a raise because in most cases your boss will need to go to his boss to get authorization for it, especially if it is off cycle. In terms of how you should approach your boss, it has to be face-to-face, and preferably without too much advance warning, although this is contingent upon you being able to “pop in” for the conversation without having to schedule a meeting. It is too easy for them to say no via phone or email. Also, if you give them even a few hours’ notice that you want to talk about pay it gives them time to prepare a laundry list of excuses. It is also important not to be tone-deaf to your boss’s situation. If you can see they are under a lot of pressure or if there are deadlines looming, you might want to wait a few days until you can get them at a less tense moment. Remember to keep it positive and about your impact, and regardless of the outcome, make sure to thank them for considering it.
The WRONG way to go about asking is to come in and make it either about your financial situation or about how much others are making either inside or outside of your company. Although some managers may give in if you come to them with a heartfelt story about how you are struggling to make ends meet, many will claim empathy and ignore you, saying it is out of their hands. If you come to your manager saying, “I know Bob makes $10k more than I do” you run the risk of your boss pointing out all the ways Bob is better than you, or alienating Bob when the manager goes and grills him on why you know his salary (and I don’t know how many times as a manager I had people come to me with a firm belief that they were making less than a co-worker who had the same or even lower salary than they did). Even worse if you come in and say “Company XYZ is paying 15% more to its sales staff than you pay me” than they might very well ask you to go find a job with them.
Know your worth
Although you should never use what other companies are paying to try and argue for a raise, you should keep an eye on the market and know your worth. You can do this by applying for other jobs, talking to recruiters in your field, looking at salary survey data from your industry. This is important because if you do decide to apply elsewhere you need to know if you are currently at the bottom, middle, or top of the market with respect to salary. It will also help you know if you are being unreasonable when asking for a raise. For example, if you get job offers from a few companies that are all below your current salary and you see that you are near the top of the pay scales from salary surveys, you may want to tread very carefully.
One final note, if you do receive an offer from another company, be careful about using it for leverage with your current employer. Although they may match that offer, they may also try to put you on smaller raises for the next several years to get you back toward the middle of a pay band. They may also take it out in terms of lower discretionary bonuses. Worst of all, they may mark you as a “problem” making you the first on the chopping block if things go bad. It is better to go to a new shop that wants and values you than to be a “problem” for your current employer.
It is up to you to make your argument for a raise or promotion. You have to chase what you want and you need to maximize your chance of success by doing it with a rational and professional argument.
Ask for a raise the way Spock from Star Trek would, with cold Vulcan logic, “Captain, it is only logical that you increase my salary as I have executed on the following projects this past year, delivering an increase of X% efficiency generating Y% in additional new sales.” Well, maybe not quite like that, but you get my point.
Here at Caveman Cash we believe that everyone can achieve personal financial independence, and we’re dedicated to helping you along this journey. If you haven’t already done so, please consider signing-up for our newsletter which will bring some great deals to your inbox every week and let you know when we are running our Financial Freedom courses.
Have questions? Drop us a message with questions about your finances and we’ll do our best to get them answered during our Friday Q&A.
The information which is summarized herein does not constitute financial or other professional advice and is general in nature. It does not take into account your specific circumstances and should not be acted on without full understanding of your current situation and future goals and objectives by a fully qualified financial advisor. In doing so you risk making commitment to a product and/or strategy that may not be suitable to your needs.
Whilst we have tried to ensure the accuracy and completeness of the contents of this website, we cannot offer any undertaking or guarantee, either expressly or implicitly, including liability towards third parties, regarding how correct, complete or up to date the contents of this website are. We reserve the right to supplement this website at any time or to change or delete any information contained or views expressed on this website.
This site accepts no liability for any loss or damage howsoever arising out of the use of this website or reliance on the content of the website.