Employee Compensation & Negotiating Raises

One of the interesting parts about being a twenty-something is dealing with your salary. Depending on the company you work for, the process may vary widely. Depending on the company, there may be no process at all.

If your employer doesn't have have a review process, you need to create one. Every year you need to have a discussion about your objectives and how you can measure your success in your role. The annual review may or may not discuss your salary, but it is paramount that you can discuss your performance as an employee. This will be a key tool to negotiate an appropriate pay increase.

You should expect, at the very least, to get a cost of living raise each and every year. I'll pin that number, for the sake of discussion, at 2%. If you don't get a 2% raise each and every year, your employer is giving you a pay cut -> they are taking money out of your pocket. If you honestly believe that you are over paid and can not find similar compensation somewhere else, then you don't have much room for complaint. However, if you think you're being underpaid, then you have every right and reason to negotiate.

I think it's critically important to realize that your employer needs to have a valid reason to pay you more than you are earning now. Your life circumstances can not come into play. For example, the following are not reasons why your employer should give you a raise:

• You want to buy a house and need more money to get the size house you want.
• You are getting married and need to cover the cost
• The interest rates on your student loans are increasing.
• You are expecting a child and you need to provide for them.
• Your spouse is changing or leaving his or her job and you need to make up some of the difference in compensation.

These are all personal reasons. Your employer doesn't care about how you spend your pay check. They care about how you are making them money or saving them money. Your employer's #1 objective is to get the most (work) for the least (money). Your objective as the worker is the opposite.

There are, however, valid reasons why you should expect additional compensation.

• Exceeding company goals, especially related to creating income or reducing costs.
• Performing extra responsibilities that potentially reduce the amount of other employees needed to accomplish the tasks.
• Others performing your job function at other companies are getting paid more than you.
• Coworkers or those with less experience at your same company are getting paid more than you.

Another thing to mention is that employees seldom realize how much negotiating power they have.

The cost of replacing a good employee is incredible. First, the company needs to find a new employee. While they search, the position is unfilled and additional strain is put on coworkers who now have more work to do. It is unlikely the company will find someone with exactly the right skill sets, so after the replacement is hired, there is time where they are paying the replacement for less than 100% output (training). If it is a mid to upper level replacement, they might need to use an outside recruiter, who will get paid up to 30% of the position's annual salary. Bottom line: Replacing good employees costs big bucks!

Keep this in mind when looking to negotiate your next raise. A few percent isn't much when leaving will lower the moral of the office, costs the company valuable training time and the possible cost of an upfront fee of 30% of your salary. Every person in human resources knows this, and its quite possible that your supervisor does as well. If you bring up a raise, they're going to have to discuss it past HR, who will surely clue your supervisor in.

One element is not good for salary negotiation: Another job offer.

It may seem like the golden ticket, "Hey boss man, you better give me this raise or I'm going to go and work for ABC company! Look at this incredible offer they made me!"

Here are the simple facts: If you have the brief conversation above with your boss, your current employer will likely cough up and offer you whatever salary request you made, so they do not lose you. However, make no mistake, this is only temporarily. Once you mention that you are going to leave or have considered leaving, you are no longer loyal to the company. They want to keep you around only for strategic value and to possibly train your replacement. No ifs, ands or buts: your days are numbered.

Alternate jobs offers are not a card to be played, they're an opportunity you accept or do not accept.

Whew, a lot of random information on the subject here. Hope you enjoyed it. Comment away!