Things to consider when asking for a pay rise amid soaring inflation

Pay rises are at the forefront of everyone’s mind at the moment. And why wouldn’t they be?

At the beginning of the pandemic, real wages fell 2.1 per cent. Then between June 2021 and 2022, the consumer price index (CPI) rose to a shocking 6.1 per cent.

It is also a global issue. The annual inflation rate in the UK increased to 9.4 per cent in June 2022 – the highest in 40 years – with comparative wage growth of 6.8 per cent from February to April 2022.

Then we have our worldwide skills shortage and record low unemployment rates. It is a war for talent. A fight, struggle, and seize.

As with any supply and demand equation, supply shortages equate to price increases. Translate that to the employment landscape, and higher salaries are on offer.

Surely, the scene is set. With the current market conditions, ask and you shall receive. No real effort is required. But that would be the wrong assumption.

As the world emerges from COVID-19, it is no ordinary playing field. Despite the talent shortages and inflation, the ‘R’ word is circulating, making the rounds and just waiting to be declared.

It is a melange of high hope and depressing uncertainty. Whether it is a ‘material meltdown’, predicted slow economic growth, or a recession, be savvy in approaching your pay rise.

Here are some things you should know ahead of negotiating a salary increase:

Reasoning

Pay rises typically stem from the following rationale:

1. Salary is no longer in line with market, like for like
2. Inflation/CPI increases
3. Working at a higher skill or task level than originally employed
4. Employee retention, as the cost to replace is too high and/or inconvenient.

In our current market, the first two points are the safest bet to ask for and secure a pay increase.

The third point is a legitimate ask however, does the business require the higher level versus the original requirement?

The last point, while flattering, is precarious. In an economic downturn, the cost to replace someone may reduce and, in conjunction with a lower salary, may become an attractive option for an employer.

Research your industry and job

Be thorough in your research for both your industry and specific role. Knowledge of these areas provides confidence and bargaining power.

Before making assumptions, compare like with like. For example: education, years and levels of experience, breadth, and depth.

Use recruitment agencies, job advertisements, and industry salary guides to gather information.

The job description

Your job description is the contract or agreement of tasks, duties and responsibilities in return for your salary.

Review it to see if you are meeting everything described. Your manager will be using the job description as the starting point for baseline discussions (e.g. are the basics for what you are employed for being met?)

Otherwise, you may not pass go and what was intended as a pay rise meeting turns into a performance review.

Not all pay rises are possible

For many workers, their pay is set according to an award or enterprise agreement, meaning you cannot individually negotiate a pay rise. However, the good news is annual increases are usually set as part of the award/agreement.

There are also organisations, typically global, governed by salary banding, criteria, and levels. Again, this makes it difficult for individual negotiation. However, if you feel an increase is warranted, still have the conversation.

Apart from empowerment, there may be other benefits, bonuses, training, or advancements in the future.

Your mindset

Do not be too swayed by all you hear, read, and see. It may influence your mindset to a place of entitlement and justification, causing your discussion to become defensive.

Sometimes, in our quest to buoy ourselves in anticipation of a difficult or intimidating conversation, we appear overly confident and even arrogant. That is never a good entrée to a negotiation. Instead, hark back to the positive moments and feelings towards your job in manifesting the right mindset.

It is hard to balance the rightful and justified individual needs in asking for a pay rise versus the economic reality of what businesses are continuing to go through.

Just as you are experiencing increased costs of living, so too is your workplace. It is a conundrum. For some employers, it may not be a matter of not wanting to provide a pay rise but rather not being able to.

Eventually, these increased costs, whether it’s salaries or all the other input costs, will see a levelling out.

Of course, financial rewards are important and a necessary function of why we work. However, timing is often the number one precursor in life’s successes.

Pick when, how and what else is vital for your wellbeing, happiness and security. Negotiate on all factors not just for the now but for your future self as well.