Takeaways
- Increasing your salary can help you reach your financial goals faster.
- Writing out why you deserve a raise can help you articulate your goals.
- Be as specific as possible when asking your manager for a raise or promotion.
- Negotiating a raise can be your biggest negotiation of the year, so practice.
- Consider your entire compensation structure (salary, plans, bonuses, and equity) in your discussions.
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Do you feel like you should earn more money? You are not alone. Almost half of employees feel underpaid in their current position [1]. Most companies have regular mid-year and year-end review cycles that allow you to discuss your career progress, skill development, goals for the year, and total compensation adjustments with your manager.
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These regular touchpoints are perfect times to discuss compensation. However, finding time outside of regularly scheduled review cycles can be challenging and might take some effort, but it is well worth the effort. You want the expectation gap between what you think you make and your actual pay to remain small. If there is a widening chasm, you might be a candidate for joining the ranks of about a third of employees who are disengaged at work [2]. To be successful, it is better to learn how to ask for a raise at the right time to get the pay you deserve.
Why Asking for a Raise Matters
Asking to earn more income at work can be incredibly important to your long-term financial goals. Increasing income allows you to pay off debt quickly, start investing in stocks and bonds, and save for retirement faster.
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For example, those who earn $150,000 or more participate 100% more in 401(k) plans than those who make less than $15,000 [3]. This plan participation discrepancy highlights that with more discretionary income, you can focus on meeting goals instead of just getting by.
10 Steps to Get a Raise
Asking for a raise can make people uncomfortable, but the reality is that you should convert this cringe-worthy event into a positive learning experience. While a wonderful manager can mentor you in the right direction, there is no better person to look out for your career development than yourself.
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This starts with making sure that you get the pay you deserve. Here are nine steps to help you formulate your strategy for asking for a raise.
1. Write Out Your Why
There is usually a reason you believe you should be paid more. Excellent employees can be led to work longer hours than their peers because of superior performance. If this is the case for you, you might end up feeling disgruntled with the amount of work you are delivering without receiving commiserate compensation.
Before you ask for a raise, one of the more critical tasks is to sit down with pen and paper to write out exactly why you think you deserve a raise. List out your accomplishments, career objectives, and reasons you should receive a raise.
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A theoretical list could include items such as being underpaid relative to your peers, receiving excellent reviews from your manager with no increase in pay, or having to take on more work responsibilities without a compensation adjustment. Once you have your whys down on paper, you can start to think holistically about your pay and career aspirations, which will help guide your conversation.
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2. Understand Your Total Compensation
There is a reason that having an emergency fund and slush fund can help you navigate your career development more effectively. Distancing yourself from the paycheck-to-paycheck lifestyle allows you to take a step back and analyze your compensation from the appropriate level.
Most people tend to focus on their hourly rate or salary, but there are other pieces of compensation to improve. Compensation is a blend of variables: salary, benefits, retirement plans (e.g., 401(k) plans), bonus percentage, paid time off, and equity compensation.
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Where you work might affect your manager’s outlook on your raise. For example, startup companies focus on giving employees a larger equity compensation package with options or restricted stock units (RSUs). As a result, startup companies tend to pay lower salaries than more well-established revenue-generating companies. When you ask your manager for a raise, you should understand what portion of your compensation you want increased.
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Mature companies making massive profits often pay their shareholders dividends. High-yielding dividend stocks can be a great place to start investing to diversify your income streams.
3. Know Your Ask
Optimizing for an increase in salary and bonus percentage may give you more cash today. However, if you are trying to focus on the long term, you could negotiate an increase in equity compensation. Depending on the type of business you work for, your manager may easily be able to give you more salary and less equity or more equity and no salary adjustment.
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You need to know what you want to ask your manager, and if you are aiming for a raise above the traditional 3% merit raise, come prepared with your accomplishments over the last several months and with compensation data for your position in hand.
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4. Do Your Research
Having a compensation conversation with market data in hand is a smart money move. You should know what the salary range is like for your position. This might take some research.
Websites like Salary.com or PayScale offer free salary reports. These reports can give you an idea of the range of salaries paid for a particular position (e.g., what the top 25% of performers earn or what the bottom 25% of employees make). You can break down the report by education level, geographic location, number of direct reports, performance, and years of experience. All these extra factors can help you titrate where you should be compensation-wise.
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This data will give you the information you need for a productive and well-balanced conversation with your manager. Before discussing, it is best to formulate a plan for your specific ask.
5. Be Specific
Managers are busy. The last thing you want to do in a conversation about compensation is to be vague. Being specific about what title you want during a promotion or how much of an increase in base salary you want will give your manager clear information to consider and run up the proverbial flagpole.
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For example, let’s say you are a successful product manager. You have done your research and know that the top 25% of performers earn an annual salary of $75,000. You have received glowing performance reviews for the past two years but are earning only $60,000. You can specifically ask for a $15,000 increase in your salary to align your pay and performance with market conditions.
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6. Practice Negotiating
Before you have a specific conversation about your raise, you need to practice how you plan on approaching the talk with your manager. Try having this exchange with someone who you are comfortable talking about money with - think friends, family, or partner. If you don’t want to practice with anyone, have a conversation with yourself in front of a mirror (yes, this works).
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Remember that timing is everything. Contemplate when you think a good time is to ask your manager about your raise. This chat might not be best if you and your manager are in the middle of a large project. Instead, the ideal timing could take place right after project completion or the completion of a successful product launch.
7. Schedule a Meeting
Armed with your compensation data, thoughts on why you deserve your raise, and tact with how to deliver your message fully congealed, the next step is to get some time on your manager’s schedule by scheduling a meeting.
Because managers are inundated with meeting requests, it can be advantageous to proactively title the meeting to describe what you would like to discuss. For example, a meeting invite titled “Year End Performance Review Discussion” will be more well-received than “Need Salary Increase.” Put yourself in your manager’s shoes.
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Another strategy is to keep the meeting as informal as possible. You can ask your manager to meet over coffee or lunch to discuss your performance and request a raise. Understand that this approach might catch your manager off guard, so it is vital to understand that you might not get an answer on your raise during that specific meeting. Whether you are working at a startup or a large company, compensation adjustments tend to take a couple of months to actualize. Being prepared for that timeline will only increase your ability to remain positive.
8. Remain Positive
The best policy is to try to remain positive before and after you talk with your boss about getting a raise. Discussing compensation can be a highly charged conversation, but staying cool and calm during this discussion can show your manager you are a seasoned professional.
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Even after your compensation conversation, it is critical to remain positive. Your conversation might be multi-leveled and sustained over a period of time. Being upbeat and ensuring your work product is top-notch will only help your cause.
9. Be Patient
Managers are human. They have competing priorities and operate within the confines of their authority. Your manager might even agree that you deserve a raise but inform you that company policy only allows for promotions and salary adjustments at certain points during the year.
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You should be realistic about this as well. Simply because you ask for a promotion you deserve doesn’t necessarily mean it will appear in your next paycheck. You might have to be patient and see the process through. This could take a couple of months to actualize. Be realistic and patient with the process. And if you don’t want to wait for their timeline, you can always consider applying for a new position at another company.
Smart Tip:
One of the fastest ways to boost income is to get a new job. During a strong labor market, job applicants are in the driver’s seat for how much income and compensation they can command.
10. Document Your Progress
Writing down the sequence of your conversation with your manager can be extremely informative. After you have listed your reasons for why you think you deserve a raise, it is helpful to write down how you think the conversation with your manager might go. Will it be positive or negative? Will you get the raise you deserve? Will you get more? These are all questions and answers to help you formulate a strategy for talking with your manager.
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Once you have had your conversation, revisit your initial thoughts. Were you wildly off or spot on with your assessment? Lastly, you want to document how the conversation about your raise progressed. Consider writing down any action items that arose from the conversation. There could be key insights into the business that your manager provided that could make you optimistic about the long-term trajectory of your employer. Alternatively, you could have gained key insights that led you to start looking for a new position, which is also informative.
Smart Summary
Getting a boost in salary, bonus, or equity compensation increases your chances of financial success. Making more income can help alleviate the financial pressures of the moment, but it won’t solve all your problems. If you have a bad system in place, making more money can add fuel to the fire. Make sure you start a budget and focus on the right financial goals.
Being paid well for your work is very rewarding. While asking for a raise or promotion might seem intimidating at first, if you are willing to have a conversation with your manager, you are much more likely to demonstrate that you are an engaged employee. The simple fact that you are confident enough to have the conversation might lead to better and higher-paying positions in the future.
(1) Robert Half. Are You Underpaid? Survey Released With Robert Half 2019 Salary Guides Finds 46 Percent Of Workers Feel Shortchanged. Last Accessed January 30, 2024.
(2) Gallop. U.S. Employee Engagement Needs a Rebound in 2023. Last Accessed January 30, 2024.
(3) Vanguard. How America Saves 2023. Last Accessed January 30, 2024.
