Dave Ramsey, a famous money management expert and radio host, has a quote that "your greatest asset is your paycheck". We don't agree on everything but that is something I believe is exactly right. The more we make in our paycheck from work and side hustles that bring in extra income, the more we can put towards accomplishing our money goals. I don't think we talk enough about our income when it comes to managing our finances. It seems like everyone jumps to the advice of "make sure you have a budget" as the starting point. We will talk about spending plans later, but know that I don't like the word "budget" because it feels to me like the word diet...restrictive and something that could be pretty hard to stick to.
Instead I think we should start with our pay and make sure that we are doing everything we can to maximize the amount of money that is coming in. In this post, we will walk through the six steps to consider if you want to answer this question: Should I ask my boss for a raise?
What you have to first understand is that your employer probably wants you to stay at the company. In this really competitive labor market, it is expensive to lose people and find a replacement. The other thing you need to understand is that your company doesn't want to pay you a penny more than necessary to get you to stay. For most companies the biggest expense they face as a business are people costs with salaries and bonuses being the biggest ticket items. I say this not to make you angry at your company but as someone who has worked in the Compensation organization of a Fortune 15 company. This is a very real dynamic. You have to fully own and advocate for your career, and that clearly should include how much you get paid.
Step 1:
The first step you need to spend time completing is some self reflection. Hey...this site IS called Calm Cash right? This self reflection is to focus on your work product and understanding the value you bring to your business. Are you consistently exceeding expectations? Do you do things proactively that advance projects or work outcomes? Or do you have to be told what to do? Do your co-workers think you are valuable? Does your boss? How is your relationship with him or her?
Having self awareness about your contributions is a really important first step because extra money usually doesn't become available to the workers that are simply meeting the expectations. The money goes to those that are crushing it and have the right skills, attitude and execution that your employer values. If you aren't consistently crushing it, it might not be the right time to have this talk. But it takes the right reflection and introspection in a calm state to know where you really stand. So spend time looking back and looking within.
Step 2:
Step 2 is pretty simple and you can answer it quickly. How long have you been in the job or your current role? If it is less than say 6 to 8 months, it is probably too soon to ask for a pay raise. The argument against you is you haven't been in the role long enough to prove yourself. Don't make it easy for them to shoot you down. Unless...
There is an exception to Step 2. Have you recently completed a high profile project that went exceedingly well? Maybe they put you in a role to focus on a really critical project or they added you to a team that needed reinforcements and you helped turn it around to deliver a great result. If you have a milestone project win under your belt, it may be a great time to take your shot.
Step 3:
Step 3 is a research project about your company. You want to be prepared for the big ask so that means understanding a few things that are specific to your company. How do they react to people asking for raises? Ask some co-workers if they know. Also sites like Glassdoor can help you get a feel for company culture, which could include how they approach compensation and raise requests. Some cultures are definitely more open to these asks than others.
Also, you have to know when the compensation reviews take place. Most companies have an annual process where they look at market data to determine if adjustments are needed to various jobs. Also, they will give out raises (or as we call them at my company "merit increases" because these increases in pay are based on your performance ratings). We are a pay-for-performance company which means more money goes to the higher performers.
What you don't want to do is ask for a raise right after the annual compensation process. For example, at my company we do performance reviews and pay raises each February and the new increases take effect in March on your first paycheck. What you shouldn't do in this scenario is show up in April and ask for a raise. You've just armed the company to say "well you just missed it...you should have asked me a month or two ago". You have to do your research to know when your window is for the ask.
Lastly find the compensation policy at your employer. If you can't find it posted, ask an HR person for help. This can help you understand things like your pay band (sometimes called salary range or target salary range) which is the minimum and maximum pay for your job. Also these policies can help you understand the percentage increases for promotions or other job changes your company allows. Remember you are gathering as much data and information as possible to help you formulate your raise request.
Step 4:
Step 4 is all about determining how much to ask for and putting it in writing. You can ask for your raise either as a dollar amount or a percent of your pay. So for example you could say a $5000 increase or a 10% raise. A good rule of thumb is to ask for anywhere between 10% and 20% as long as you aren’t already at the top of your pay band. This is why getting compensation information from your company in step 3 is really important.
If you can’t get any information on compensation policies or pay bands, a site like PayScale will be helpful. You can get a free report on what the market is paying for your job or role. You can use this data point to justify your ask.
I would caution asking for more than 20% unless you are being paid significantly below market and are an outstanding performer. Anything more and you reduce the likelihood of success. In my time as a Compensation consultant, I can count on one hand the number of 20%+ increases I've seen. They just are super rare.
Once you've settled on the right amount, it is time to formally write out your ask. This will help you get your story down because writing or typing your raise request out will help you practice how you deliver the message.
This isn't just "I want a 10% raise". You need to include the following items in your request: a list of your accomplishments, present the compensation data you found using the internal or external data and lastly include 2 to 3 goals or expectations your boss can expect after you get the raise. This last one is important because your supervisor needs to understand what is in it for them. At most companies, he or she will have to go ask at least one other person in leadership to approve the raise for you. So in some ways they have to take a risk as well. Helping them understand why this raise is a good idea with your newly stated goals can only help get them onboard to go find the money.
Step 5:
Step 5 is to have the conversation with your boss. You've done your research, you formulated the ask and you've officially put it in writing. You are ready! Schedule time with your supervisor. A good title for the meeting is "Career and Pay Discussion". Don't schedule it for an hour from now. Give a day or two from the time you set it up.
In the meeting, present your ask in writing but also verbally talk through the value you've brought the business, the data you've found and the raise increase you want. Acknowledge that you want to stay at the company, but that you also need to be fairly compensated for the work you contribute. Lastly, thank them and ask if it is okay to check back in a week if you haven't heard anything.
Real quickly on that last item. As mentioned earlier, your boss likely has to go get approval from at least one other person to give the raise. That takes time and you need to give them time to make it happen. But you have now also set the expectation that there is another conversation in a week which helps create some urgency. This is great.
So now the only thing left is a yes or no. And there is one more step.
Step 6:
Step 6 is all about what are you going to do if they say no?
Remember that a no doesn't mean you aren't valued. There are always other factors at play at a company, and sometimes they are impossible for you to know. Maybe there is a budget freeze because the company lost a client. Maybe there is a merger or acquisition on the horizon and all hiring and raises are stopped.
But if you get a no, it is important that you get the "why" from your supervisor. Ask what you can do to be considered for a pay raise in the future. A good boss will give you the reasons for the rejection and tell you how you can improve your chances for better compensation in the future.
If the answers you get back don't work for you, the last question to answer is this...is this company still a good fit for me? Going into the process you should know the answer. If the answer is no, it is time to find that next, great opportunity.
Those are the steps! I can't stress enough the importance of doing your homework. There is always some risk when it comes to asking for a raise, and I want you to be as prepared as possible. And I want you to maximize your income! It will help you reach more of your money goals and have peace of mind.
And that is what Calm Cash is all about!