I Need a Raise

Dear Dr. Per Cap: 

What’s the best way to ask for a raise?  I like my job but the higher cost of living is making it tough to get by.

Signed, 

Needs a Raise

Dear Needs a Raise:

Think of a pay increase request like any other negotiation – two people or parties both advocating for a want or need.  One key strong negotiators share in common is that they think just as much about what the person sitting across the table is bargaining for as they think about themselves.

Put yourself in your boss’s shoes.  While it’s true that high inflation is squeezing many employees to demand larger paychecks, it’s also true that many employers are worried about a looming recession, higher interest rates, and other economic woes.  These are very real concerns and many businesses and organizations are responding by trimming costs, especially salary and wage hikes.

Realize also that your boss might face pressure from higher ups so your approach must be professional, fair, and realistic.  Most pay raises fall into one of three categories – seniority increases, merit increases, and cost-of-living increases  Seniority increases are generally based on the length of time a person has been employed.  Merit increases consider job performance and skills, and cost-of-living increases are why I might need a second mortgage to buy a carton of eggs.

Present your need for a raise if possible by drawing from all of the above.  While a higher cost of living is your primary concern, also think about how long you’ve been on the job and when you got your last raise.  If it’s been a few years, mention that.  Same goes for merit.  Are you better at your job now than before your last pay raise?  Have you acquired any new skills or completed training that makes you a more valuable employee?  If so, make it known. 

Make a compelling case for that higher cost of living.  Everyone knows food and energy costs are sky high but it’s not enough to complain.  Take the time to document your higher monthly expenses.  Make a simple spreadsheet or just write a list of your costs for rent, food, gas, utilities, and other expenses.  List your old cost for each expense next to the new higher cost and calculate the difference.  This way you’re giving your employer a paper trail that’s hard to ignore.  You might even want to share photocopies of bills and proofs of payment.  Remember – the more facts and documentation you provide – the better.

Now make the “ask”.  If you can prove that across the board your cost of living has increased 10%, that’s a number to negotiate for.  But maybe start a little higher by asking for a 12% raise so you have some wiggle room to get to 10% if there’s push back. 

Finally, be realistic.  Last year the average pay increase for U.S. employees was 6.5 % and for 2023 the average pay raise employees expect is 6.7% based on information shared by a national payroll firm.  Keep those figures in mind and hope you get that raise!

Funded by First Nations with support from the FINRA Investor Education Foundation, it's important to note that the content provided does not constitute professional or financial advice, and Dr. Per Cap is not a licensed investment advisor. Questions can be directed to Dr. Per Cap at [email protected].