Wages growth in Australia has been pretty flat in recent years, so you might think the chances of a pay rise to boost your borrowing power are low. But if you don’t think you’re getting paid enough it could still be worth a try. We investigate how to boost your chances of success when negotiating a pay rise.
A quick look at a few online salary surveys will tell you if you’re being remunerated at the going market rate for your industry. The prospect of salary increases varies between different industry sectors and may depend on demands for specialist skills in your industry. Understanding the average salaries and the current shortage or oversupply of skilled workers in your field will provide valuable background for your salary negotiations.
Do your research
The process of asking for a pay rise starts well before you set foot inside the boss’s office. And it could take a few months before you’re even prepared and in a strong position to negotiate. So where do you start?
1. Use salary guides – there are plenty of these online for your industry so review a cross section for the bigger picture
2. Be aware of how your company sets pay scales as it might limit the amount you can request
3. Research your industry and be aware of wider economic factors so you can set a realistic goal
4. Put your request in writing. It will formalise the process and help you map out your reasons
5. Boost your skill set with training or certification in sought-after competencies in your industry or workplace
6. Consider getting involved in new projects to boost your value to the company
7. Be prepared to be flexible on the amount and the timing
Research shows that those who negotiate a pay rise generally succeed, but it can be a difficult conversation to start. If you do your research and you’re prepared, it doesn’t have to be.
Knowing what you’re worth is more than just researching the market rate for your job. If you’ve worked in a role for a few years and it’s grown but your salary hasn’t, or you’ve got a great track record and a reputation for going the extra mile, then the company might be willing to consider a pay rise. A few tips for showing them what you’re worth include:
1. Turn up to the meeting armed with great performance reviews, outcomes from projects you were a part of, or targets you have met and exceeded
2. Look for ways to show how your contribution has led to tangible results such as process improvements or financial returns
3. Offer positive feedback or references from colleagues about your performance
Happy employees are more productive so it’s in the best interests of your boss to keep you happy. It’s also likely to be cheaper since the cost of replacing staff can be high, and happy employees are less likely to leave.
Of course, it takes more than money to keep employees happy, but if getting your pay rise means you can finally get your dream home, that personal satisfaction and joy is likely to be reflected in your work.
Have the conversation
There’s some debate about whether you should make the first offer when you’re negotiating a pay rise. Research suggests that if you make the opening offer it will act as an ‘anchor’ and pull all the other numbers in the negotiation towards it. So, if you’ve done your research and you’re confident then be brave and make the opening move. A few other tips to keep in mind include:
1. Book a morning meeting as psychologists argue it’s the best time of the day to ask for a raise. Unless it’s a Monday no one’s in a good mood on a Monday morning
2. Be realistic but start at your high point, you don’t want the negotiation to be ‘anchored’ to a number that’s lower than you’d really like
3. Be flexible as you could still end up getting what you want even if it takes a couple of pay rises
4. Lead the discussion, research suggests that making your argument first could sway the outcome in your favour
5. Be objective, professional and listen, there may be things you’re not aware of that could affect the outcome
Asking for a pay rise can be uncomfortable, and it’s easy to get emotional if you feel anxious. Try to stay calm. Pause and take sips of water if you feel things aren’t going the way you’d hoped.
Avoid these pitfalls
Getting angry in a pay negotiation is only one way that’s likely to signal the end of the conversation, if not your career with the company. Here’s a few other things to keep in mind when negotiating for the best possible outcome:
1. Don’t use negative or self-defeating language and don’t apologise
2. Keep the discussion focused on your value
3. Steer clear of anything personal such as the fact that you need a pay rise so you can boost your borrowing power for a home loan
4. Listen and try not to talk too much, resist the urge to fill the silence because you’re nervous
5. Don’t threaten to leave if you don’t get a raise … they might just take you up on it
Even if you’ve got a valid argument for a raise, the company may not be able to afford it, so be patient and hold on to your research. You can always negotiate when the next annual pay review comes around. And by then you could have saved even more for that home loan deposit.
What difference will it really make?
You’ve done the research and you know there’s a good chance you’ll get that pay rise if you ask, but will it really make that much difference to your borrowing power?
The average full time salary in Australia in 2016 was just over $78,800 and the average pay rise was less than two percent or roughly $1600 a year. That could add just over $12,000 to the borrowing power of an average full time employee. And in today’s property market, every little bit counts.
Of course, if you earn more than the average salary and you’re aiming for a bigger increase, it will be a different story for you. In any case, while you’re doing your research, it’s worth doing a few sums to see what the benefit will really be if your negotiations are successful.
A pay rise is just one way to boost you borrowing power. If you’re already a home owner, you could consider some other ways to turn your home into a money maker.
Finding the right home loan is about more than just what you can borrow; talk to your Aussie broker today about getting a deal that fits your financial position and will work hardest for you.