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Never Ask for a Pay Raise

In the hypothetical scenario that you want to optimize your finances as an employee, you have two options: Reduce your current expenses and increase your salary. Since both of these options are non-exclusive, you choose to do both.

Many words have been written about reducing your expenses, so today, we’ll talk about the latter option: Increase your salary.

If you want to ask for a pay raise, in short words: Don’t. Stop right there. Most of the time, you’re not ready to ask for it.

Understand the incentive mechanics of your organization

Rather, I invite you to understand the mechanics of the organization you work for. Yes, this implies you need to get skilled at Office Politics and Game Theory. Office Politics it’s a game that, whether you play or not, has effects on your relationship with your company. This is a bit of indirection to the objective, since asking for a pay raise has a direct cost to the relationship with your employer (more on this later), it’s worth exploring first.

Understand the incentives of the person who takes the decisions for pay raises:

  • Do you have a strong position in your company? This has many ways to be answered, but it should be the answer of: Are you of great value to the company? And therefore: Is this value exchange imbalanced by a great factor? (i.e. you provide a lot more than they provide you, by market standards)
  • Who factually decides the pay raises? And, is this value exchange visible to the decider? If your manager doesn’t manage a cost center or an organizational budget, then your manager is not the person who decides your pay raises. This depends on the maturity of the organization, as managers are given more and more responsibilities, but they may not have yet the possibility to manage organizational budgets, so, therefore, they can’t affect the payroll.
  • Do you have a glass ceiling at the company? What is the average salary for your position at the company? How much do you estimate your boss earns? There’s a “salary inertia” for the department you’re in, which means, it’s a gravitational pull towards that “average” standard. You can try to outperform that average, but it’s going to be hard. Also, you might be already the top earner in your department, and your base salary is too close to your manager’s one, in that case, since you can never exceed them (except for commissions or bonuses), that in itself will cap your base salary until your boss is moved further away from you in compensation.

The idea behind these questions is to understand the incentives for pay raises, so you can optimize for them. Raises should be obvious to be given, in a way your boss can vouch for you and say to the decision-maker: “We need to incentivize this person, the value they have delivered is unparalleled in comparison to their coworkers. If we lose this person from the organization that loss would negatively impact the performance of the department.” If your boss is not a raving fan of your job performance, you will not get a pay raise.

Additionally, the reality for some companies is that the marketing of yourself is more important than your value delivered. That’s something to take into account, because you may need to readjust your feelings of why you work that hard, and the compensation needle doesn’t seem to move in your favor. For some companies, what you “seem to be” is more important than “to be.” Be ready to recognize that reality and leverage that in your favor.

If your company is small enough, there’s also the possibility that pay raises are arbitrary. In which case, there won’t be anything you can do about it, other than become the favorite of your department. When the pay raise criteria are like this, the more important thing will be that you play your cards right at Office Politics.

Whether performance or appearances are valued, timing is also important. Understand how the payroll works in your company, and try to get a sense of how and when pay raises are done. Some companies add funds to their bank accounts on a certain day of the month and use the previous day to meet about if someone should need a raise. Be mindful of what you can do to improve your chances around that time, so you’re at the top of the mind of your boss at the time of holding that meeting. Mark the days in your personal calendar if need be.

The cost of asking for a pay raise

Occasionally, it’s necessary to nudge them into providing a pay raise, because you might determine you’re severely underpaid. Is the company growing, but the salaries are stalled? Do you pull a lot of weight for your coworkers and if you left the department would crash entirely? Then it’s time to have that conversation.

Determining if you’re underpaid is not the topic of this post, but let’s start with: It’s not about your expenses going through the skies. It’s about if the win-win relationship remains a well-balanced one, instead of a win-lose situation with the “lose” side on you.

Before going forward with this topic, let’s not forget the gold nugget that will change your professional life forever: You’re in a business relationship with your employer and therefore, you run a business. The business of you.

You’re not part of a “camaraderie” and you’re most certainly not part of a “family.” These are euphemisms for hiding the dry, business side of the relationship, but it has the negative effect of diminishing your power position at the time of making negotiations for your compensation. Whether the company is intentional of this effect or not, be aware.

So, having this out of the road: How does asking for a pay raise has a direct cost to the relationship with your employer? It depends on your approach. If you use the approach of value and collaboration, it will affect the relationship positively (but your pay raise inquiry can still be rejected). If you use the approach of weakness and victim mindset, you’ll start becoming uncomfortable to the company's management since this implies an extractive relationship. It implies you want something from them, but it never says anything about you giving to the business. Make it about them, not about you.

Therefore, there’s a right way to ask for a pay raise and a wrong way. Let’s explore the wrong way first:

  • The wrong way: “I need a pay raise, please, I have four children, car repairs to be done and a mortgage to pay” This delivers the implicit message that you’ve mismanaged your value (money = value). What your boss will understand is that he has to rescue you from some hole you’ve put yourself into, and that’s not a good position to be in. You shouldn’t need to be financially rescued, otherwise, that speaks volumes of how irresponsible you’ve been with your time and money, and that also delivers the message that you aren’t that responsible enough to handle other matters (professional matters especially).
  • The right way: “I’d like to explore ways to increase the compensation this company provides me, by delivering more value” For this, you must be confident of two things: that you’re in high regard at the eyes of the management, and that you consistently deliver value to the company, per the company values (whatever those are: efficiency, profitable, among others). You must also explore different scenarios in your mind of how the conversation will go, in both optimistic and pessimistic ways. And be ready for every scenario. If it turns out well, you’ll be taken into consideration for a pay raise, if it goes wrong, you’ll start becoming uncomfortable for the company.

The reasons for a pay raise can never be personal. A company is a production unit in the economy, not a charity. As a consequence, personal reasons make a weak case and add up to the extractive relationship (you extracting to them). If you come from a personal perspective, not only your chances of getting a pay raise will be severed, the conversation in the mind of your employer will be about how you reduce the company's profitability by asking for more money, instead of increasing it by exchanging value in a win-win business relationship, and this makes them uncomfortable having you around.

For a pay raise to come to fruition, you need to back up your case with a strong case. Confidence in the voice when negotiating the salary, solid arguments backed up by evident results and milestones hit, will make for a strong case. Yet the pay raise is not guaranteed to happen, so let go of the expectation they have to pay you more despite your strong case. The attitude must be of aligned collaboration and showing commitment to the success of the company.

A good employer, even if it argues it doesn’t have any budget for pay raises currently, will get the implicit message you’re communicating. The implicit message is that you’re looking forward to escalating your income, whether with them or not. Maybe you intend to keep working with them, but once you introduce the pay raise conversation, the relationship is changed forever. This might mean you have to look elsewhere for a pay raise. Be ready to leave, since things can turn dark very quickly.

The easiest way to escalate your salary is to jump ship elsewhere. The math of salaries is not flexible. It depends on the country, industry, and company, but you almost can never be raised more than 20%. At most you’re just “adjusted for inflation,” (and not even that). So, what are your choices? To improve your economy by switching companies, always taking into consideration other factors of course (company culture, professional development, skills required to join, among others).

For the same skills, some companies just pay better. The change can be in the order of twice or thrice your current salary. Sometimes even more if it’s a VC-funded startup company or a solid enterprise.

If your previous employer gets bitter at you by turning in your two weeks notice, it means they are not resilient. It means they were not ready for you to leave and they resent you. It also means you were a critical piece of the company. Before leaving, make sure to have everyone trained in your job role, so the impact is reduced. It’s a small courtesy in gratitude for the business relationship you’ve just had with them. If training is not possible (let’s say you have unqualified coworkers for your job position), well, it’s a scenario for them to handle.

A mountain is better than a little hill. Avoid being the King of the Hill. It has the cost of reducing your professional quality, and your growth will be hindered.

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