The past three years have been difficult for many workers to navigate, as inflation and economic uncertainty prompted many businesses to implement sweeping layoffs. The professional services and technology sectors were hit the hardest, perhaps signaling the end of the golden age for startups and venture capital.
According to Forbes’ layoff tracker, over 300,000 employees were laid off across most industries in 2023. In such an unpredictable labor market, many workers are more concerned with keeping their jobs than climbing the corporate ladder.
💸💰 Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💸
This job insecurity may also prevent employees from advocating for themselves to get the pay they deserve.
After a sharp uptick in June 2022, inflation steadily dropped over the last twelve months, though consumers don’t see much of a difference in their wallets.
Consumer prices remain high, and many Americans find that their salaries can’t keep up with inflation or cover expenses as they used to. Pursuing a raise is the most direct way to increase your disposable income, although securing one can be easier said than done.
We spoke with Shannon McLay, Founder and CEO of the Financial Gym, to discuss the best strategy for employees hoping to get a pay raise during the upcoming performance review season. Industry research and salary transparency with coworkers can help set a realistic goal to work towards.
Shutterstock
Pay transparency may be the key to salary negotiations
60% of workers note their salaries haven’t kept pace with inflation, prompting nearly two-thirds of Americans to seek a pay raise or a new role altogether in 2023. Employees are increasingly concerned with making enough money as the rising cost of living diminishes buying power.
McLay outlines how to best prepare yourself for the dreaded but necessary pay raise conversation with your manager. The first step, she notes, is doing your research and due diligence.
“The trick is getting a raise — number one, you got to know your worth,” she said. “We always say know your worth, understand your career, and what you are capable of making in that profession.”
“Start by doing your research. Look at companies like Payscale or Glassdoor, see what others in your region and your type of job are earning, and compare your pay to,” she continued. “That is number one. If you're in a job that averages $50,000 a year and you go and ask your boss for $100,000, you don’t look smart or informed.”
More on personal finance:
- How your mortgage is key to early retirement
- Dave Ramsey bluntly speaks on interest rates and mortgages
- The average American faces one major 401(k) retirement dilemma
Under the National Labor Relations Act, employees have the right to discuss salaries with coworkers. However, according to a September 2023 LendingTree survey, only 13% of workers are comfortable sharing payment details with colleagues.
Understanding the full scope of salary history and income brackets for your job title can give employees considerable leverage when negotiating a raise.
“When you're going to negotiate for what you're worth, you want to come in prepared on what to expect. So look at what the industry is paying,” she said. “I encourage people to talk to coworkers — you're allowed to. A company can't fire you for talking about pay.”
“So, ask around and start having conversations with your immediate boss and putting feelers out there.”
Keep expectations realistic and prepare for all outcomes
McLay notes that the best approach to pay raise conversations is to be upfront about what you want and devise a roadmap to gradually achieve it.
“I've been the boss, and I’ve been the employee, so I say that it always starts with a conversation,” she explained. “You need to bring the evidence to your manager and say, ‘Here's where I'm thinking — is there a path for me to get there?’"
Employers are planning an average pay raise of 3.9% in 2025, up slightly from 2024, despite sluggish hiring trends and higher unemployment rates. While these increases may seem modest, they more than offset inflation and will help increase workers' take-home pay.
Related: Dave Ramsey has a warning for people looking to buy a home now
Keeping an open mind to salary counteroffers is another key part of the negotiation process.
“I think that's a better way of approaching it. Instead of saying, I need to be making $75,000 or $100,000 right now, you need to say, ‘The industry pays this amount, but I'm making this. I'm curious if there's a path for me to get there.'”
“During these conversations, I advise clients to be prepared for what your boss is going to say,” she explained. "They may say you're not delivering at a higher level; you might need to do x, y, and z to improve.”
Workers may have more of an advantage when pushing for pay raises next year, as 2025 salary budgets are increasing at one of the fastest rates in twenty years. Those working in insurance, energy and agriculture, and communications may have the most luck, as those industries have the highest planned increases.
However, economists are also predicting a soft labor market in 2025 with fewer job openings and more layoffs, so employees have to prepare themselves for the possibility that there may not be room in the annual budget for raises.
“Or the company might not be in a good financial position to pay you what you want. Then you have to take that and decide what you will do from there.”
Related: Veteran fund manager sees world of pain coming for stocks
