Wage growth has overtaken inflation so the chances of getting more money may soon start to recede
Average wages in the UK are now rising faster than inflation, meaning employees should act sooner rather than later if they want a pay rise. But how should you go about trying to get one?
Figures from the Office for National Statistics show that regular pay rose by 7.8% between April and June, the highest annual rate since records began in 2001.
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This comes as the headline rate of inflation fell from 7.9% in June to 6.8% in July.
That could be bad news for employees, said Laura Suter, head of personal finance at investment platform AJ Bell. She told the i paper that “every drop in the rate of inflation” gives staff less negotiating power.
Employers are still factoring in pay rises for staff. A quarterly survey of 2,000 firms by the Chartered Institute of Personnel and Development (CIPD) found that human resources executives expect to increase basic pay rates by a median 5%, the same rate as the previous two quarters.
Should you ask for a pay rise?
While no one would turn down a bump in wages, pay rises aren’t always good for the economy. Businesses often raise prices “to offset higher fixed costs”, warned City A.M., which can mean inflation doesn’t fall as fast it could have if wages had stayed the same.
Indeed, Bank of England governor Andrew Bailey warned in his July 2023 Mansion House speech that “high pay settlements were hitting the fight against inflation”, the Financial Times reported.
Chancellor Jeremy Hunt echoed this at the same event, claiming that public sector pay rises could also push up inflation as “more borrowing is itself inflationary”.
But with food price inflation still at 14.9%, said The Big Issue, “you’ll likely still feel the harsh effects of inflation on your bank balance”, so it is “fair to ask” for more money, the magazine said, so you can cope with the rising cost of living.
Do your research
The first step in negotiating a pay rise is to do your research. Try to “discreetly ask” colleagues in a similar role what they earn, said MoneyWeek, but you may need to reveal yours in return.
The ONS has a calculator to show how much your salary should increase to keep up with inflation. You could also check websites such as Glassdoor, or use Google to find what people in your job typically earn.
Build your case and back up your argument with “financial facts”. You should try to show what you have achieved and how you have helped the company make or save money, Geoff Fawcett, director of recruitment firm Hays, told MoneyWeek.
The “right time” to ask for a pay rise is when you can best show your value to an employer, said Indeed.com, such as your recent good performance.
Request a meeting
Arrange a meeting rather than just “drop the pay rise request” on your boss, career coach Jane Ferré told The Money Edit. It is also a good idea to prepare a script and practise what you are going to say to avoid any last-minute nerves.
Be clear and confident “without being too aggressive or pushy”, said Glassdoor. Ideally, you want your manager to see your request as “reasonable and justified” rather than “greedy or demanding”.
Don’t put your boss under “too much pressure” during the meeting though, said Hays. Give them time to consider “rather than asking them to make a snap judgement”, the recruitment firm advised.
Consider your timing
Make sure you “read the room”, LinkedIn career expert Charlotte Davies told the Daily Mirror.
Consider the financial health of the company you work for and, if appropriate, you can then make your case if you are confident that you are “bringing benefits” to the business.
Be prepared to negotiate
There is no requirement for your employer to give you a pay rise, said The Telegraph, so you should “prepare for the fact you may need to negotiate”. And “always start high before lowering your expectations”, Jo Ayoubi, co-founder of workplace culture specialist Track Surveys, told the newspaper.
Threatening to quit is a “risky strategy”, said The Times Money Mentor. Instead, check if there are other benefits you could get to push up the value of your overall package.
What happens if your boss refuses a pay rise?
It’s “not necessarily the end of the world” if your boss says no, said MonsterJobs. There are other ways to get value from your job such as seeing if your company will invest in your professional development, as this may “improve your employability and earning power”.
Don’t take rejection personally. Your boss could say no because the company can’t afford to pay you more, or they don’t think your performance is good enough, explained TotalJobs. “Be persistent,” the jobs website said, and set a date to review the situation and agree “clear objectives” to work towards.
Get the decision in writing and if it’s a no, said the i paper, remember there are currently plenty of positions elsewhere that “will be paying what you want”.
With a lack of suitable people to fill vacancies and inflation high for the time being, the newspaper added, employees have a “strong negotiating position”, so “don’t let your bosses forget it”.
