How To Negotiate A Pay Rise

Salary Negotiations

For many in the profession, annual performance review time can be the most daunting and stressful part of the employment calendar. Excluding promotions, it is the one chance you have in the year to present your case and secure a better than average salary increase.

Performance reviews are exactly that – a review of your performance.  Taking a cap in hand approach to annual reviews, and hoping that the goodwill you’ve cultivated throughout the year will be enough to get you more, is rarely a successful strategy in salary negotiations.

Equally unsuccessful is using your personal circumstances to try and justify a raise – it is not your employer’s concern if you’ve suddenly got a bigger mortgage, your rent was increased or day care costs skyrocketed.

Playing this card draws heavily on the emotional currency you’ve banked with your employer over the year, and puts your relationship before your performance. It immediately places strain on your relationship and, even if granted, it can take a long time to get your account back in credit.

You need to have a plan and strategy in place if you want to negotiate a better than average salary increase.

Gather Data To Support Your Case

Every commercial organisation in the world, whether it’s a law firm or retailer, is in the business of making money, and every employee is hired to solve a problem.

Knowing what problems you solve and what you have achieved in this area is key to understanding how to negotiate a pay rise.

People in sales rarely have difficulty when it comes to annual reviews as they are usually aware of their sales figures and the commercial impact that they have on the company. For example: ‘I was no.1 sales rep’, or ‘I grew market share by 250%’, or ‘I exceeded my budget by $500k’. When presented to management successes such as these are hard to argue against.

Similarly, those in private practice can look to billable hours as a simple way to measure their performance and impact on the firm. Lawyers who smash their budgets out of the park are rarely backward about coming forward regarding their figures when it comes to appraisals.

But what if you don’t work in private practice, or your billings aren’t what you’d hoped? What if you work in house and billings are not a measure of success?

You can’t rely on personal sales data, so you need to look for something else. More often than not it’s a simple matter of changing how you look at your work.

Everything’s Measurable

Take time before the meeting to review the projects that you have worked on or initiatives that you have participated in throughout the year. All of these will have a ‘results’ orientation and you need to identify and focus on the commercial outcomes of these projects.

Measurable figures that have an impact on negotiations are monetary, percentile or numerical values. These highlight the impact you have on the business.

Steer clear of the emotional and goodwill aspects of your work. This is largely intangible and emotional goodwill is hard to translate to hard cash in a salary negotiation. It is the results of goodwill and the impact on the workplace that you need to report on.

For example: overachieving budget by $100k or 130%; growth in your client base or risk mitigation or cost avoidance, etc…

This kind of information is largely accessible and is the kind of information you need to be thinking about when it comes to your appraisal.

Private Practice vs In-house And How You Can Measure Your Impact

Private Practice:

Billable Hours: Achievement of target, or comparison against others in the practice group
Client Growth: Increased customer mix de-risks a business if there’s a downturn
Client Retention: Ever been handed a disgruntled client and manage to turn it around? Retention of client = retained revenue / loss avoidance.
Referred Work: Value of business you have referred to internal practice groups. Would they have it if you didn’t bring it in?
Client Satisfaction: Happy clients come back and spend more. Do you have repeat business?
Marketing: Market share, increased client awareness, new business won or limited competitor activity in your field.
Building the Brand: Public speaking, press and networking events are all good PR vehicles for the firm to build their brand. Have you secured work because of your efforts here?

In-House:

Risk Mitigation: de-risking contracts reduces exposure, and results in lower insurance premiums. Can you find out by how much?
Cost Avoidance: negotiating contracts to shift costs to 3rdparties equals bottom line savings.
Capital Raising/Grant Funding: In-house counsel provide invaluable advise in capital raising activities. Did you help secure investment funding?
Commercialisation: Spin out a new product / company? Negotiate trading terms? What was the value of the deal for the business?
Procurement: Negotiating terms with suppliers to reduce costs / improved supplier quality.
Productivity / Efficiency: Improved time to execute tasks / number of deals increased in a given year.
Compliance: Were you successful in securing compliance / concessions from government on particular matters? Impact of this – what was the resulting commercial outcome?

Calculating Your Value

While it helps to have access to budgets and expenditure data, it is not essential. If you can work out the approximate impact on the organisation through some simple mathematics you are well on your way to building a strong argument to support your case.

Examples

In-house: You could have led a project at work – let’s say there were 5 people working on the project at a cost of $1,000 per person per day. If you deliver the project one week ahead of schedule you have saved the company a significant amount of money on wages cost and productivity to the value of $25,000 ($1,000 x 5 people x 5 days).

Conversely, if in private practice working on a similar matter you might have noticed a key issue with the case, resulting in more time going into the matter than was estimated to ensure the client was properly protected. More time equals more revenue for the firm.

Another example could be in contract negotiation for trading terms for a client’s product. Improved delivery or distribution time has a positive effect further down the supply chain, leading to faster turnaround times or access to market. If a product hits the shelves two weeks faster than normal try to calculate the $ value in sales per month. Divide this by half and you have the rough value of the impact you’ve had at work. Chances are it’s worth thousands, and either the client or internal stakeholders will be happy with the outcome.

The amounts do not need be exact figures, just approximate amounts that demonstrate you are actively thinking about the business and the commercial impact of your role.

During the Review Meeting

If you don’t ask, you don’t get.

That said, it is better to wait for the question of salary to be brought up by your employer rather than raising the matter straight away. Being too keen or being anything other than objective is only likely to bring on a confrontation about the matter. Confrontations rarely end in win-win for both parties.

Remain objective. Avoid emotive words and sentences like ‘I’ve worked hard all year and I feel I deserve a raise’. Instead use phrases that speak objectively – for example: ‘my contributions in the past year have had a significant and positive impact on the business, and I believe that merits a review of my salary package.’

This will then trigger a question asking you to justify your position. If you’ve done your sums correctly, and they show that you’re having a positive impact, then you will be presenting some solid data that supports your case and this will be hard to knock back.

Finally

Be reasonable. Shooting for the stars with a 25%-50% salary increase is unlikely to be awarded. Employers have budgets that they need to stick to and going far beyond that is very hard to justify unless you’re working miracles every day.

For most employers 3-5% is an expected increase during annual reviews due to Consumer Price Indexing. Aim for a mid-point of double this (around 8-10%). It doesn’t create an unrealistic expectation for your employer, and doesn’t place too much pressure on you for the year ahead.

Good luck!

 by Diarmuid Sexton