Most Companies Are Sticking With 3 Percent Raises This Year. Here's What To Do About It.

Wages are stagnant, but additional raises are still possible in the off-cycle, experts suggest.
Even though most companies are not handing out big raises, employees can still come out ahead in the negotiation.
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Even though most companies are not handing out big raises, employees can still come out ahead in the negotiation.

Despite new tax breaks for businesses and booming corporate profits, do not expect your company to suddenly become generous with sharing that wealth anytime soon. Of 7,030 employers surveyed by PayScale at the end of 2018 in the U.S., Canada, and other countries, 69 percent said they expected to keep average salary increases to a paltry 3 percent or less ― roughly the same as last year.

An increasing majority of the organizations surveyed said employee retention was a major concern (66 percent, compared to 59 percent last year). But despite this urgency, wages remain stagnant.

“The economy and the job market have been doing well. And the expectation is that there would be upward pressure on wages, and we just haven’t seen that to the degree that you might expect,” said Lydia Frank, vice president of content at PayScale.

But not all employees’ salary increases are projected to be low, the report found: 5 percent of companies said they expected to give at least one employee a 30 percent raise.

“You have to be self-aware whether you are in a competitive job. Not everybody is getting the 3 percent increase. That’s the average,” Frank advised. “They are using that strategically. Some people may get nothing, some people may get 1 percent, some people may get 15 percent.”

What to do if your raise is lower than you deserve

If you are among the employees being told that your raise is going to be a meager percentage this year, do not despair. Recognize that the number may have been set long before your manager gave you the figures, said Josh Doody, author of Fearless Salary Negotiation.

“If you’ve already been told, ‘Here’s what you’re getting, it’s 3 percent,’ that’s the end of a typically long, exhaustive budgeting process that has resulted in that number,” he said. “It can be pretty challenging in real time, at that moment, to get more than 3 percent.”

But you can still ask for a significant raise outside of the typical pay raise cycle by making that a separate conversation from the standard corporate one. “Do not attempt to get your big raise to close any pay gap you are experiencing during the normal process of an annual review or annual raise period. It’s not going to happen then. You have to go off-cycle,” said Katie Donovan, the founder of consulting firm Equal Pay Negotiations.

Doody suggests doing your own research to determine what your salary should be and revisiting the topic in three to six months with your manager.

For employees who know that they are underpaid, the time to prepare starts when you realize the gap, Donovan recommended. “The day that you know you are underpaid is the day to start prepping yourself to have that conversation, regardless of what time of year it is,” she said.

Know how you contribute to a company’s bottom line

When discussing why you need a salary raise, focus on the impact your job has. “When you talk about the job and the impact, it takes away the over-anxiety-ridden, personal aspect of it,” Donovan said.

If you are stumped on how to talk about your work, Doody said you should look for areas where you have driven revenue, saved costs, or saved time. Did you take on an extra responsibility to save your manager a headache? Are you doing two people’s jobs after layoffs? Keep those moments in mind to bring up.

You want to do your best to think through, ‘What are the specific things that I am doing that are adding unanticipated value that’s not compensated based on my last salary increase?’” Doody said.

Don’t see bonuses as a salary replacement

The PayScale report found that more employers are sweetening their low salary deals by doing variable compensation plans, such as bonuses. Sixty-six percent of employers in the survey said they did individual incentive bonuses. But do not be fooled into seeing that money as a guarantee: A lot of those bonus numbers could be based on factors outside an employee’s control, Doody said.

“The performance bonus could be very well based on managerial decisions that are way above my pay grade, so now I’m at the mercy of, ‘How competent is the management team for this company and not how good is Josh at his job,’” Doody said.

Benefits and perks can be brought up in compensation talks

Benefits make up about 30 percent of companies’ compensation plans. You should include other forms of compensation in your raise talk, some experts suggest.

“There could be additional money for school or tuition or professional development,” said Ramona Ortega, CEO and founder of Mi Dinero, Mi Futuro, a personal financial tech company. “That also shows that you care about your job and you care about what you’re doing.”

Asking for more paid professional development opportunities can benefit both employer and employee. If you become a better public speaker at conferences, for example, you will be helping the company market itself and you are learning a new skill set that you did not have before, Donovan said.

But these forms of compensation can only go so far. Recognize that no paid conferences, additional vacation days, or better work-from-home policy can make up for a severe pay difference.

“There is nothing to replace being 20 percent underpaid,” Donovan said.

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