Inflation of 7.9% is at a 40 year high. We are in the midst of “The Great Resignation” and it is a job seeker’s market characterized by more jobs than workers. Employees going through annual reviews and job seekers looking for strong offers believe they can ask for an 8% pay raise or even more based on all of those factors. Are they right? How does one ask for an 8% pay raise? What should employers do to retain their employees?
According to a HiBob.com survey 27% of workers want better pay in their job and are willing to leave their job if they don’t get a raise. Employees know they have more leverage today than in the past. Prior to the pandemic companies were used to doing the minimum they needed to do to hire and retain people and it tended to work. That is not the case in the hot labor market of 2022. Over 56% of U.S. workers who quit their jobs in 2021 say they are now earning more money with their new employer.
What Should Employers Do?
Offset the increased cost of living for your employees. If giving an 8% pay raise across the board isn’t feasible, what about a one-time cash bonus to account for inflation? How about a second review six months from their standard annual review? This is a common practice in Argentina where the rate of inflation in 2021 was more than 50%. Even offering gas cards to those who aren’t working remotely shows an element of care and concern.
Communicate with greater transparency. Pay transparency is all the vogue with the amount of information available on the internet and the savviness of the younger generations in accessing it. Make sure you and your managers can discuss your company’s compensation philosophy and framework. Make it clear how you ensure equity within the company.
Educate your employees about the impact of inflation on their earnings and their savings by bringing in a financial advisor for free, private review and recommendation. This will also highlight why tying salary raises to inflation is not a good idea. Over the last decade inflation has never reached 3% annually. Most companies build in a 3% raise in their year-to-year budget. Inflation in 2021 was 1.4% and 2020 2.3%. Tying raises to cost-of-living increases would not be advantageous to the employee.
Broaden the conversation from base salary increases to total rewards. Are your benefits, 401K plan and long term equity awards better than the marketplace? Highlight areas where you have increased investments and allow for discussion on benefits your employees are asking for – childcare or student loan repayment are hot right now.
Asking for an 8% Pay Raise
How can an employee make the case that they not only need, but are worth, a raise that makes up for what inflation is doing to their budgets?
Time It Right – Certainly this market, right now offers a background for a raise request. It is best done tied with your annual review, but if you are six months away from that, make the case that a second review is called for based on inflation and hot prospects in the marketplace.
Show Why You Deserve the Raise – Make sure you can cite specific recent accomplishments that show you performing your position above and beyond what is expected. Just talking about it isn’t good enough. You must have examples.
Research Compensation – Use all that the internet is providing on Glassdoor and Paysa or in your professional societies to come up with a clear, market-driven base salary. Make sure you factor in your years of experience, the size of your company and the location where you work.
Temper Your Response – Don’t issue an ultimatum to your boss or to HR. Your employer will listen to a well-researched, well-justified, well-thought out request but “Give me a raise or I’ll leave” isn’t the way to build a career. Yet, you must ask. Avoiding a difficult ask often means you don’t get what you want.