Negotiating Your Pay Rise - The Essentials
Published by Drew Okawa at Smashwords
Copyright 2009 Drew Okawa
This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you're reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.
This book is designed for all employees that have an opportunity to negotiate their remuneration with their employer.
The information in this book was originally available as part of an audio course and has been used successfully by numerous employees to achieve substantial pay rises.
Disclaimer: The content of this book is for informational purposes only. It should not be construed as personal, business or legal advice. The information herein should therefore not be relied upon as a substitute for personal, business or legal advice. This book is not intended to provide or confirm a judgment nor is any claim made as to practical efficacy. No claims herein have been evaluated by any governing counselling, business, management, or legal authority within Australia or any other country. The author and publisher cannot be held liable in any way for results stemming from the practical use of this information as the information herein is provided “as is”, without warranty of any kind, either expressed or implied. Those wishing guidance on the subject matter should seek direct and customised advice. New methods, techniques and best practices are being developed daily in the fields of business, management, and law. The information contained within this might not be current, complete, reliable, or accurate.
A Note on Gender Equality: Throughout this material every attempt has been made to refer to both genders with regard to non-specific references and examples. Attempts have also been made to represent both genders equally in specific examples and given scenarios. When talking generally of an employee and/or employer, it is the author’s intention to imply both the female and male gender. These are intentionally listed in alphabetical order - for example, “her/his”, “her/him, and “he/she”.
Introduction
Salary negotiation, wage review, remuneration discussion, trying to get more money for what you do at work… whatever you call it, it’s a subject that affects most of us more than once in our working lives.
It can be a very difficult issue to deal with and many people handle the situation in a less than ideal way. This can result in frustration, resentment, relationship breakdown, or even worse.
However, there are constructive and positive ways in which to approach and handle a pay review. Selecting the right techniques can maximise the chances of a positive result.
Achieving a pay rise is dependant on more than just your performance. An employer won’t generally give you what it can’t justify, and can’t give you what it hasn’t got. This means, that if you or your team are performing poorly or are failing to contribute to the bottom line profits of the business, then it’ll be very hard for the employer to justify spending more on you, by way of a pay rise. Now, even if you and your team are performing well, is the same true for the overall organisation? If money’s tight and profits are small, then there may not be any available money to allocate to employee wages, no matter how well a worker’s performing. And obviously the performance of an organisation can be heavily influenced by industry performance, market pressures, competitor activities, and even the domestic and global economies. So the result of your pay review should be placed into context. This isn’t always easy to assess, as you may not be privy to all the information necessary to make a complete assessment. Information you can’t access may include company profit and loss statements - but you can estimate things. If the boss is spending up big on new, designer furniture for the office, then it may show that things can’t be going too badly. If the sheriff’s taking office equipment away in satisfaction of unpaid company debts, then this is obviously an indicator of the opposite.
You’re basically trying to achieve an increase, in context of your employer’s position in the commercial landscape and in context of your colleagues’ achievements in their pursuits of increases also. If others don’t ask for an increase, and you do, then there may be more available in the company coffers to line your pockets by way of a rise. If everyone else does, and you don’t, then wage costs for your organisation may have ballooned, giving you perhaps much less chance of receiving a rise having not already, proactively sought one.
Inactivity may lead to severe frustration that consumes you during and outside of business hours.
So, how’s it done? How do you get what you think you deserve? And how do you even figure out and become sure of what you deserve?
There really is no ‘standard’ or ‘correct’ method for approaching the issue. It’s something that doesn’t really seem to be taught to people, and much of what’s written on the topic is extremely basic and at a surface level. Perhaps due to the innumerable ways a pay review can play out means trainers have shied away from covering the topic. It’s true that every pay review situation is unique, as they deal with different organisations, manager, employees and so on. However, there are still certain aspects that allow some fundamentals to be widely applied. These are what this learning material will focus on.
Approaches include formal and informal addressing of the issue – delivering the message to your employer via letter, email, face-to-face conversation, or even by viral communication (being similar to viral marketing… where you’d discuss the issue with colleagues and perhaps complain to them about your lowly wage and hope the message makes it to the boss.
There are many ways to handle the situation, but I feel it’s better to do it through a meeting face-to-face rather than in a letter or email request, or relying on a game of viral communication… similar to the game of “Pass it On”, a.k.a. “Chinese whispers” to get your message across. Letters and emails carry a lack of accent, intonation, and immediate explanation following on from seeing the receiver’s reaction including facial expressions. I feel it’s best to engage your reviewer in free-flowing dialogue without the chance of misconstrued meaning.
But to engage your reviewer in face-to-face dialogue means you need to be prepared for where the discussion may take you. Emails back and forth for example, can be analysed before responses are sent. But if you’re sitting across from the other person, you need to be confident enough to continue engaging in conversation even when the discussion becomes quite difficult and perhaps awkward.
To embark on this mission, you need to be thoroughly prepared and well equipped – to have thought through the issues and to have gathered all the information you required to properly assess the situation and develop your strategy and plan. This includes knowing what you’ll do in response to a negative outcome. You have to cover as many twists and turns as reasonably possible.
This book covers the topic in detail so you can understand how best to deal with this important and often stressful event.
It may be that you don’t achieve a pay rise immediately. This may be the outcome of your review for many different and varied reasons – some of which you may really understand and even if not in front of you employer, may privately agree with. Now knowing these, it will help you work towards a positive result for the future. Perhaps now you know you have to undergo some further training on several software applications your organisation uses in order to progress in your role, or you need to further develop your team-working skills. In these cases, you now have the beginnings of a plan and road map to future pay reviews. Doing nothing, or doing something crazy, would not have achieved such a positive result, albeit not an instantly gratifying one.
If you want more financial reward from your role, then you basically have three options:
Do nothing out of fear or lack of confidence. You may get a pay rise out of the blue without effort, but you may also win the lotto one day too.
Or,
Move to another organisation or role where you’ll be offered what you want. This may work. However, you should consider the risks associated with leaving the known for the unknown. You may find that the non-financial aspects of the new role take away from the extra dollars you’re getting. Moving jobs should be considered carefully, and to end up in a new role where in a few years you’re faced with an inability to seek a pay rise will again lead to the situation you were intent on overcoming in the first place.
Or,
Address the situation and skilfully work towards achieving a pay review that results in a pay rise.
This learning material focuses on option number three. It’s all about using strategy in seeking a pay rise.
All other things being equal, positive results are more likely to flow to those who have researched, planned, strategised, and have worked to maximise their control of and power in the situation – in addition, it’d be recommended that your campaign for a wage rise be conducted in a professional, confident and polite manner.
Remain sensitive to company procedure
Before launching head first into a negotiation, even after having read this book, you should properly consider the procedures and policies affecting your grab for some extra cash.
Check your employer’s procedural manuals or handbook if there is one. If not, you may opt to discreetly speak with a trusted colleague about any ‘unwritten procedures’ when it comes to the topic of ‘pay reviews’.
There may be written or unwritten processes set out for handling pay reviews. These may include the HR department, your line manager or other managers.
If there aren’t any written procedures and you’re unable to discover any unwritten ones, then you should consider requesting a meeting through your HR department or immediate manager. The intent here is to formally kick start the review process and find out how it’ll be structured within the organisation in which you work. Although you might prefer to steer clear of creating such a formal situation, it may be a necessary step to get the ball rolling. Organisations that don’t have structured processes for pay reviews can tend to use people’s reluctance to approach the subject to their advantage. Simply put,"If we don’t mention it, and you don’t feel comfortable asking about it, then we don’t need to address it."
And much frustration can come from constant dropping of hints if they fall on deaf ears.
The difference between the value of a role & the value of an individual
It’s important to understand that there’s a difference between the value of the role that you perform and your value as an individual. They aren’t necessarily the same or proportional to one another.
Let’s consider the following scenario. A lady owns a city courier service. She has many cyclists who make deliveries throughout the day. She pays them an hourly rate for the time they work. She’s calculated how much she makes from her clients and knows she can only afford to pay $30.00 an hour for each rider.
Imagine that you’re one of the riders and work part time delivering documents. It doesn’t help your employer if you happen to have a PhD in anthropology. Your skills in that area won’t positively affect the performance of your role as a deliverer. She still can’t afford to pay you more than $30.00 an hour, even although you know of other doctors of anthropology that are getting paid over $100.00 an hour for the work they do.
In this case, the role, that is, delivering documents, is dictating how much you’re getting paid. And your employer has determined that the role is only worth $30.00 an hour.
But can’t some people be better at a job than others? Shouldn’t you be able to earn more if the skills you have do positively affect your performance within your role? Can’t outstanding performance allow a role to increase its worth, even if only for the employees that are outstanding performers?
Let’s then consider the following. Of all the couriers, you know the city streets the best – you know all of the lane ways and how to get places the quickest. Therefore, while the others push themselves to make 6 deliveries an hour, you consistently achieve 8 or more. Your skills - in this case, your knowledge of the roads - is positively affecting the performance of your role as a deliverer. Despite this, you all get the same hourly rate.
Here’s where your individual value can serve to influence the value of your role and increase the value your employer may place on the role – not for everyone in the role, but for somebody with your skills that have proven to positively affect the way the role is being performed.
Let’s say you approach your employer and ask her for some more money. You point out that your production is over 30% more than all the other riders. You feel you therefore deserve more money per hour. You tell her you feel you deserve an increase from $30.00 to $40.00 an hour.
Her response will depend on many things. One of these, is whether or not the role has any room to reward performance. Some roles are flexible in this way whilst others aren’t. And how may performance be rewarded? Sometimes it may be through hourly rate, and other times it may be via different means.
The owner understands your point. She says she’ll consider your proposal.
She approaches you at the beginning of your next shift. She starts by saying that she can’t afford to raise your hourly rate by $10.00, because that in itself doesn’t give you incentive to keep performing better than all the others. However, she suggests she could pay you a performance bonus for each delivery you make. Given that you make around 8 deliveries an hour, she could pay you $0.50 per delivery, and if you kept performing at 8 an hour, you would earn $34.00 per hour. You think about this for a minute, then respond with an alternative pay structure.
You say the following: "I see where you’re coming from with performance, and wanting to know I’ll keep performing highly, even after I get an increase. How about I guarantee my performance through an incentive scheme? For each delivery over and above 6 per hour, I earn $4.00. This means that if I achieve 8 each hour, I’ll get an extra $8.00 per hour. It means that all up, you’ll have paid me $4.75 per delivery. This is compared with the others, who will have been paid $5.00 for each of their 6 deliveries."
The owner can’t see anything wrong with the logic of what you’ve proposed and agrees to the deal.
You’ve successfully increased the value of your role. This has been done through proving that your actions as a result of your individual value are positively affecting the role, and in such a way that its value may be increased.
This is not always going to be the case for everyone. There are some roles where your individual worth will not be able to drive up the worth of your role. Some roles reach a limit when it comes to remuneration. The reality is, that if your role has reached a limit – and it’s a limit you’re uncomfortable with, and perhaps a limit that is under what you believe you could earn from a role that better incorporates or uses your individual worth, then you may need to consider changing roles.
You may have specialist skills or abilities, but if your role doesn’t allow you to be recognised for or utilise them, then your reward for possessing them will be suppressed. This comes back to a courier who has a PhD in anthropology. If he’s working as a courier, then he’s getting paid as a courier – not as a doctor of anthropology.
Your value, from your employer’s perspective
How much you get paid is heavily influenced by market forces including demand and supply. For example, demand for qualified carpenters may increase due to a boom in the building and construction industry. If there becomes a greater demand for carpenters, then businesses will be forced to pay carpenters more to either attract them to a new position, or to retain them within their existing team of construction workers.
Essentially the construction boom has led to the need for more carpenters, which has in turn driven up the value placed on carpentry as a skill – a skill that only qualified carpenters possess.
This example is working on the presumption that in this time of greater demand, the supply of qualified carpenters to the labour market hasn’t changed. In other words, there’s not been an unusually high influx of new carpenters into the workforce at the same time as demand has increased.
The other way in which demand and supply can drive up the cost of employing a carpenter, is if there’s a drop in supply of carpenters, whilst demand remains the same. So the number of construction projects hasn’t increased, but the number of available carpenters to the labour market has decreased. Effectively there’s less carpenters to go around, meaning that the ones that are available, become more valuable. Again, this will naturally cause employers to pay carpenters more to attract and retain them as employees.
Of course, this can all work in the totally opposite way too. If there’s a drop in demand or there becomes an oversupply of carpenters, then this can push wages down – carpenters may be effectively forced to work for less, because finding a job in their industry has become significantly harder.
Some workers look to move from one industry to another, chasing the dollars. They basically look for where demand is higher than supply and try to break into the area. The problem here is that it can take a long time to train for a new industry, and all industries are susceptible to market forces. For example, some people may train for the IT industry, only to find that when they’re ready to enter it, demand has already dropped along with the highly lucrative attraction that caused them to study for an IT career in the first place.
It’s worth noting that not only can there be demand and supply pressures on an industry in general, but these pressures can influence sub-groups within an industry too. For example, there may be an oversupply of fresh law graduates at the same time as there’s a shortage of experienced lawyers. Similarly, there may be an oversupply of criminal lawyers, at the same time as there’s a shortage of commercial lawyers.
Another factor affecting how your employer sees your value as an employee is in the contribution you make to your employer’s revenue and profit levels. This is particularly relevant when what you do clearly impacts on your employer’s profitability. We can see this in action, even if we look back to our earlier example of a courier company. Each delivery is being charged to a client, therefore generating revenue which in turn flows through to produce profit. The courier is directly involved in generating revenue through her/his actions. In this way, her/his performance can increase or decrease this rate of revenue generation. Let’s consider you work at the same courier company, but as the company’s receptionist. Can you directly see revenue flowing as a result of your activities? No. Your role is to support the business through answering and directing calls, and receiving visitors to the office. This makes it harder to show how your performance is positively affecting company revenue and profits. You can’t use a simple equation to show the value you bring to your role by way of revenue, as one of the couriers may be able to do. Having said this, it’s not impossible to show your worth – it’s just a little trickier. Consider the following example: The company you’re working for as a receptionist has experienced considerable growth over the past 12 months. Perhaps there are 20% more clients and 20% more staff. You’ve seen around a 20% increase in the number of phone calls you’re handling each day and a 15% increases in both incoming faxes and mail. If you can show these increases by way of statistics, and show that although reception is experiencing increased workloads, there has been no increase in reception staffing, you may be able to develop a case for achieving a pay increase. Increased workload, customer satisfaction or supervisor functions all lend themselves to building a case for increased pay.
If you see that the role you’re currently in cannot attract the money you’re seeking, it may be possible to expand your role so that it can. Many people manage to increase their workload, or responsibilities in order to add value to their roles and thereby justify a pay increase. This could happen through discussing your role and its possibility for expansion with your current employer. Alternatively, it may also be achieved through looking for new employment with such expansions already built into the new role.
Focusing on how to expand your role to equal or get closer to your individual worth is a great way of proactively seeking a pay rise where one first seemed impossible. It becomes a matter of developing your role, and adding value to your role, rather than just arguing that your current role’s worth more than you’re getting.
Background work – things you need to do to be prepared
These are the things you need to do in preparing for a pay review.
Gather the Facts
It’s important for you to first justify to yourself, why you should get a pay rise. If you can’t justify it to yourself, then how do you expect your employer to justify it? It may be a case of your employer not fully understanding the depth of your role - you may need to show the extent of your duties. It may be that you perform around ten hours of unpaid overtime each week, and you feel you deserve to be paid for it. It may be that you spend a considerable amount of time helping out other areas of the company, over and above your designated duties. Perhaps you’re one of five in your team and you consistently produce more output compared with the other team members. Perhaps since starting in your role you’ve completed further studies relevant to your role, or become the official first aider, for the company.
Often jobs change and evolve over time. These changes can go largely unnoticed, particularly by employers. Bosses and managers can get caught up with the higher level issues and not recognise changes at the coal face. Similarly, senior management can be distracted by operational and revenue building activities and not realise the value of many projects being completed by specialist staff. It’s a good idea to list all the tasks you perform, making note of those that have been added since you took on your role, and those outside of your current role’s description. It’s useful to order them in terms of importance, from your employer’s perspective. For example, developing initiatives for production cost savings should be listed before the fact that you’ve now become the footy tipping coordinator. All aspects of your role should be linked back to an outcome. That is to say, all of the items on your list should now be related to impacts on revenue, business development, savings, or increases in service levels or quality etc. It’s harder to show the value of your role to your employer if you’re performing a lot of tasks that don’t have a clear value for the company. If as an administrator, you make great coffee, it’s hard to show the value of this in terms of your employer’s perspective.
Part of your background work is to find out what others in the same or a similar role to yours are getting paid. You can find out a lot through just reading online and printed job advertisements. These usually include the qualifications and skills expected for the role. You may also wish to contact a recruitment consultant. If you pick one that knows about your industry, they should be able to let you know basically how much your skills are worth by analysing available employment opportunities. Some industry associations can also help with remuneration levels for particularly skilled workers within their industry.
Don’t be too surprised if your research indicates that you deserve a lot more than you’re getting, especially if you’ve been in the same presumed role at the same company for a few years or more. Plenty of people only seem to get pay rises in line with inflation each year, and these rarely reflect the rises in market rates. Sometimes this is most evident when the company has to go to market to hire new staff. A new recruit to the company you work for, doing the same role as you, could be offered more money than you - even given that you have years more experience in the company than they do.
However, before you get mad with every new employee as they come through the door, you need to consider a further point. When assessing the worth of your role to your employer, remember the factors that play a part in calculating this. These include an employee’s experience in the role, experience in the industry, and relevant qualifications. This is sometimes why a colleague or newcomer performing the same role as you will be offered more money. Before demanding more money on the basis that you do the same job as the new guy and he’s getting paid more - Make sure you properly investigate the situation. Perhaps ask the guy where he worked previously and for how long, or if he’s completed formal studies in subjects relevant to the role.
Have a look at how your industry’s travelling. Is it in the middle of a boom time, or is it suffering heavily from a downturn in demand? Understanding the pressures your employer has to contend with will help address issues based on markets and industries. These aren’t the ‘be all and end all’, but should help in building a picture of your situation. This is especially the case if you’re confronted with an employer that tries to cry poor when you know the industry’s experiencing massive growth and high profit levels, and has been unaffected by government legislation for almost a decade. All of the information you discover adds to the overall pool of that which you can draw on during discussions as part of your pay review.
The following are useful questions to ask yourself as you prepare for a pay review:
# What have you recently achieved in your role?
# What skills and knowledge have you brought to your role?
# How has the company benefited from having you in the role?