Feel like you’re underpaid? When to ask for a raise?

Throughout the workforce, every single employee wants to be paid their fair share. Ultimately, different workers will value themselves at different levels.

Some employees feel that a pay increase is a guarantee after so many months or years at the company, while others believe it’s based on their work performance.

There are several variables to consider when evaluating your current pay.

Type of Employment

  • Full Time Employee:

    Being employed by someone else can have it’s challenges, but weighing the benefits can be saved for another conversation.

    Ultimately, if someone else regularly supports an employee with a paycheck, then the “raise” conversation will typically be tilted, as the employer has most of the leverage (unless of course, you’re a linchpin in the company, meaning it would fail if you were removed).

    For most people, the case is not that they’re valuable; however, they feel that more money is a reasonable request.

    I’m not a professional boss, so I can’t say how every boss decides who is granted a pay increase or not. But there are some guidelines…
  • When is it reasonable to request more money?

    – During a yearly review/employee review (assuming it has been a positive experience).

    – After taking on more responsibility, and proving that such responsibility can be handled adequately.

    – Employment after probationary hiring period (typically 90 days) and having shown real promise to the company as a valued part of a team.
  • When is it NOT reasonable to request more money?

    – When you want to pay your car off early. [Yes, this is a legitimate reason I have heard someone ask for a raise]. The boss does not care what financial hopes and dreams you have, and 98% of people will not grant any pay increase because the employee just wants more money.

    – Being employed for a short amount of time. If a person accepts a hiring offer (including compensation), then a week later demands a raise, the boss will probably fire them on the spot.

    – During financial hardship for a growing company. During the growth period, or a “lull” in the market, the boss will have an entire set of other stressing issues on their mind, and will not take requests like this too well. Be patient, or move on to another job/career.

Contract worker/Freelancer

There has been a steady increase in the amount of contractors available for an array of different jobs in the past decade.

Sometimes these positions are called “temporary employment”.

It’s really a way for someone to hire, and not pay any benefits whatsoever. Therefore, the hire is considered temporary, or a “contractor”, or even a freelancer in some cases.

If you’re an outside entity to a business, and given contracts to do work for them, [and you’re a damn good contractor], the leverage is really nearest your side of the teeter totter.

Good sources who know what they are doing (and have proven it) can demand a premium price.

This is not to say that gouging a customer (the customer is the person who hired you) is acceptable, but you can certainly negotiate a modest percentage of pay increase after gaining experience in the field.

Self Employed

This is the easiest (and trickiest) form of employment to navigate a pay increase.

While in retrospect PLENTY of people have just attached their bank accounts together, sharing the profits of the “business”.

Almost all of those situations resulted in the business failing, and the owner having debt crush them into bankruptcy (or close to it).

So, I would recommend taking some finance classes, or hiring an accountant if money is one of those difficult things to manage for you.

It’s simple to figure out though.

Is your business profitable?

No. – Don’t give yourself a raise.

Yes. – Don’t give yourself a raise (yet). Re-invest the profit into the company to grow it some more. Live below your means, and be very patient.

Is your revenue 100% more than last year? (that would be double the amount of revenue as the prior year, ex: $100,000 in 2018, and $200,000 in 2019).

No. – Consider giving yourself a raise, but run the numbers first, if investing the money will produce a greater ROI, do that.

Yes. – Give yourself a pay increase at a modest percentage relative to the percentage of growth. 100% growth = 5%-15% pay increase. Don’t just double your pay because your revenue doubled.

There are leagues of other variables to consider. If you have your own business, you’ll figure out which path to take, and where it leads.

Certainly seek outside help if managing a business (to remain profitable) is too difficult to handle.

Work Responsibility

Regardless of the employment type, everybody has a level of responsibility associated with their position at a company or place of business.

What’s important is to identify what level of responsibility is directly proportional to the level of pay being received.

If running 3 departments, being stressed out and not being able to sleep at night only gets you $1/hr or $2,000/yr more than an employee with no responsibility/accountability, then you’ve got to have a serious conversation with the boss.

Entry Level (or Apprentice)

When a new employee starts at a job on the “bottom of the totem pole”, it’s typically the low level responsibility, and the work that most anyone could come in and start doing with no experience.

Positions of this type WILL NOT afford a high paying wage in most cases. Joining a company at minimum wage is pretty common in these positions, so expect it.

The “boss” will not entertain conversations about pay increase for new hires that have not been there a minimum of 90 days (but typically not before a one-year period).

Remember what agreements are made in the interview as to the pay associated with the position, because it will likely remain the same until the employee has proven themselves worthy over a substantial amount of time (minimum 60 days before approaching anyone about a raise).

Senior Employee

A senior employee is someone who has some experience in a business at whatever capacity they’ve been for (x) amount of time.

Working with folks who have been with the company for a decade or two makes a person realize what the “glass ceiling” on pay is for that position.

If the senior employee has nowhere to move up, or simply does not want to move into a role with more responsibility, they’re punished by remaining in the same salary bracket for lengths of time.

It’s not unusually to get insignificant raises (such as $0.10 per hour) without showing more initiative to grow and take on more duties.

The extent of responsibility towards these employees is usually around training new people, and “insight” for new managers on repeat work.

Management

Management is one of the positions that demands a significantly higher wage (in most cases) than an entry level position.

A manager typically has either education, or experience in their particular area of work which commands a higher wage.

Controlling an entire sector of a business as a manager is a big responsibility. It will become obvious to a boss where the slack is, if one department is lagging behind. Who will get that angry phone call or meeting? The manager.

With more responsibility, comes more money, typically less freedom to move, but more freedom to give others to move and fit where they need.

It’s a balancing act as a manager to allow the people under you to stretch and bend the rules to improve workflow, morale, and the company as a whole.

But know that if they stretch too far and cross a line, the manager takes responsibility for the mistake.

How is value calculated?

Simple.

Base work/responsibility will translate into base pay.

There’s nothing wrong with base pay, so long as the employee has aspirations to grow, provide more value, and be compensated for it. [Unless of course, they’re content with the pay, and can live comfortably with it].

Intermediate work/responsibility will translate into intermediate pay.

This is the sweet spot where the pay is decent, and the responsibility is reasonable.

Most people should aim for this position unless they have a great attitude and a can-do spirit.

Increase work and high responsibility will translate into great pay.

Sometimes the money is not worth the stress that comes along with positions like these, but having money does make things easier in most cases.

These are usually people in their late 20s to their 40s who sacrifice healthy habits in order to increase their net worth. Smart ones will invest during this period, so they can move in their 50s to a higher level, lower risk position that only handles big decisions (such as VP, President or CEO of a company or organization).

The Takeaway

Lots of people are being underpaid today.

Ultimately, when employees put in the effort, make reasonable decisions and improvements at work, a raise can be negotiated.

When employees “won’t take on any more until they get paid more”… they’re looking at the issue through the wrong lens. Work and value come before compensation.

Take on more responsibility, prove you can handle it over a period of 1-6 months, then approach the decision maker for a raise.

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