Here’s a common scenario: You have been underpaid throughout your career and you struggle to catch up because your future compensation seems to be determined by your past compensation. You’ve been with your current company for a year, or perhaps a few years. When you originally accepted the job, you didn’t really negotiate your salary. You may be scrambling for a way to ask your boss for a raise. You don’t want to come off as envious of your coworkers, but you do want to be better compensated. Fortunately, there are a number of ways to catch up on your salary if you’ve been underpaid.
Know your market worth and know the market:
You probably wouldn’t consider a project without doing some research first. For example, you wouldn’t repaint your house without knowing which types of paint to buy. The same thing can be said about your market value. It is important to know how your positions to compares to others in your field. That is, what are people with the same experience and skills being paid for doing the same, or a similar job? There are a number of ways to research salary amounts for your position. Glassdoor is a great resource for discovering what people in your company and your competitors are being paid. It even offers reviews of a company from current and former employees. PayScale offers a personalized salary report and includes job title, skills, education level, and location in determining a salary range. Salary.com is a little simpler to use, and provides a median snapshot of your pay range based your job title and location. In addition to online salary calculators, ask HR people and niche recruiters about the pay range for your position. Use LinkedIn to build relationships with recruiters, and ask them about average salaries for your job. If you want more information, ask a manager several levels above you what they were paid when they did your job. There’s one caveat: This approach may provide some information, but it doesn’t account for how the economy can greatly impact salaries. It can help in the justification if you are paid less than someone who had the same job years ago. You can also research your company’s competitors to see what they’re paying for the same position.
Now that you’ve done your salary range research, there is another research step to consider—your company’s finances. Having data on pay for your position is fantastic, but your company needs to be in a position to give you that raise. A company in poor financial shape may not be able to give you a raise, or the raise may fall short of what you wanted. If your company is publicly traded, you can find financial statements online. If your employer is private, discovering its financial health may be a bit harder. Some potential signs to look out for are the number of clients, and how well top executives are spending. A healthy client base and confident executives are signs your company is doing well, and can afford the raise. It’s critical to evaluate how YOU make an impact on the financial health. Even an administration position can indirectly impact the top and bottom lines of a financial statement. Also, take a moment to research your company’s budget, if you don’t already know it. Raises may have already been given out for the quarter, and you may have to wait for the next budget period. Or you can take a huge step, and see what another company is paying for your position. If you can’t get that raise, you may need to make a change in order to catch up.
You should never accept a counteroffer because it can be tantamount to career suicide. A counteroffer is designed to prevent you from leaving. In other words, you haven’t become more valuable as an employee to your boss, but it would be more of a hassle to immediately replace you. Your boss would have to deal with the disruption your departure will bring, as well as hiring someone else to fill your position. If your work was highly valued by your current employer, you wouldn’t have to resort to finding another employer to work for. Worse yet, if you make the decision to accept a counteroffer, there’s no guarantee your boss won’t fire you in the next few months. Consider this: the very act of flirting with another company can raise a red flag, and your boss may no longer trust you. When the opportunity arises, your boss may let you go at their earliest convenience. If you’ve made up your mind to resign from your company because you are underpaid, stick to your decision. Scott Love, a columnist for The Vet Recruiter, has a few stories about executives who accepted a counteroffer, and were later fired from their companies.
Build your personal case:
A demand of, “Give me more money, because I deserve it!” isn’t enough to get that raise. You may be underpaid, and have the market value data to prove it, but you have to provide your boss with a compelling reason to give you a raise. List your accomplishments and show the value you bring to the company. Illustrate the ways you help your company save money, or how you really get projects done. Name some of the most successful projects you’ve worked on. If you’re constantly praised by your clients, coworkers, and superiors, save those letters and e-mails. Pursue your case for a higher salary in a similar manner to your job hunt. You didn’t hold back on your accomplishments or recommendations. Why should it be different when it comes to catching up on your salary? Coupling market value salary ranges with your accomplishments make it much harder for your boss to dismiss your request for a salary increase. You deserve to be appropriately paid for your work. Last week I discussed how you can negotiate perks and other benefits that have monetary value to you, if pure compensation isn’t a viable offering.
Practice your pitch:
Practice making your request, sharing relevant data, and countering possible objections before you actually meet with your boss. No one is perfect, but practice certainly never hurt anyone! If the thought of talking to your boss about raises makes you nervous, a practice run with a coach or a mentor could help you get your pitch down. Alternatively, if you’re the more forceful type, practice could help you be assertive without being overly aggressive. Meditating and visualization are a great way to ensure that you approach this from the right mindset and optimize the outcome.
Negotiate a competitive pay raise, rather than a merit-based raise:
You have the market data that shows what your position is worth; now is the time to formulate a salary increase based on that information. If you’re underpaid, use the salary information to calculate the number of percentage points your raise should be. For example, if you’re paid 7% less than the market rate, ask for a raise of 7% in the form of a competitive pay raise. Pat Katepoo, the founder of Pay Raise Prep School for Women illustrates the point wonderfully in her article, “How to Get a Pay Raise of 10% or More.” Anything less than a competitive pay raise for someone who is underpaid means, he or she will never reach the baseline starting point for the job. For example, if you are being paid 10% below the market average, your boss may offer a merit pay raise offer of 5%, but that still won’t catch your salary up. There is also the risk of being paid above the market value—finding yourself on the chopping block. Catching up is a priority, but the way to get a raise above and beyond the market value for your job is to find a way to increase YOUR market value—A certification, taking on a new project, enhancing your role, or landing a big client (even if you’re NOT a sales person!). In short, a smaller pay raise will increase your salary, but you’ll lose income potential in the long run by accepting much less than what your position is actually worth.
Additionally, you could use an offer for more money from a competitor as a way to leverage your negotiating power with your current company, but by doing this you should be prepared to resign. As I stated earlier, accepting a counteroffer from your boss does your career more harm than good. You may gain a raise in the short term, but lose your job in the long run.
Once you’ve figured out how much you should be paid for your job, request a meeting with your boss. You should ask for the raise amount you’d like, show how the raise is competitive with other salaries for your position, and highlight the many tasks you perform for the company. After the meeting, follow up with a prepared document stating the terms you are requesting. Writing a letter to your boss after meeting with him or her in person allows you to plead a genuine case, versus writing the letter first. Sending a letter first can allow your boss to easily dismiss your case.
Consider a job transition:
If your bid for a higher salary fails with your current employer, consider working for another employer. Transitioning to a new company and negotiating for a salary at or above market rate is another way to increase your pay. Work your professional networks and don’t be afraid to jump ship, if you really need to. On average, an employee who stays at his or her job for two or more years can expect a pay raise of about 3%. Employees who switch jobs can earn average salary increase of 10% to 20%. If your employer can’t see your value, and won’t or can’t afford to pay you at a market rate, find someone else who will. That said, it is important to move on in a civil manner, if you do decide to work somewhere else. You never know when your boss or coworkers could provide you with valuable professional references. Burning professional bridges may make for an entertaining TV show plot point, but it is never a good idea in real life.
Salary negotiations can cause some initial trepidation, but they can be successful. Not negotiating for a high salary means you’ll be leaving money on the table, especially if you’re underpaid. The amount of money you lose in the long run can easily add up to millions of dollars. Think about it. If your boss suddenly spread out millions of dollars on a table in front of you, and said it was yours, would you say “No thanks,” and leave it behind? Probably not. This happens whenever you’re paid much less than you’re worth. You can reverse the trend of being underpaid by taking action NOW. Discover what you should be paid, formulate a new salary, practice your pitch, and make a compelling argument as to why you deserve a competitive pay raise. If your company won’t or can’t provide you with one, be prepared to look for a new employer. Think about the quality of life you could be enjoying if you are paid what the Abundance calculator determines as your present-day income. Again, being underpaid can really throw off your income track and you can lose millions throughout your career by not taking control. NOW is the time to correct that course!