With increasing evidence of a potentially slowing economy, you might not think it's the best time to ask for a raise. But even though many companies are reducing their expected salary bumps in 2008, that shouldn't stop you from getting as much compensation as you deserve.
After years of rising home prices, a boisterous economy, and easy credit terms, workers have gotten a nasty wake-up call recently. Food and energy prices have risen dramatically. Many face rising mortgage payments. And one source of extra money that was available in past years -- home equity -- has dried up in many areas of the country. Lots of families could use a raise at work.
Yet companies aren't going to make it easy. A Towers Perrin survey shows that employers expect to give raises averaging about 4% in 2008, matching the amount from 2007 but barely keeping up with inflation. Meanwhile, the mortgage debacle has forced layoffs at companies like Citigroup (NYSE:C) and Lehman Brothers (NYSE:LEH). And the pain isn't only within the financial services industry -- tech giants Intel (NASDAQ:INTC) and IBM (NYSE:IBM) have laid off workers this year, as well as retailer Circuit City (NYSE:CC).
You can't win if you don't play
All that bad news may make it seem as though you don't have much leverage to ask for a raise right now. But when times are tough, employers become increasingly dependent on their most efficient and productive employees. Even a company that's cutting its workforce may be willing to give its remaining employees more in overtime and other incentives to keep its sales and revenue levels stable.
So if you're gunning for some extra dough, here are a few things to keep in mind:
- Focus on performance. The Towers Perrin survey noted that many companies favor bonuses over permanent salary increases. These one-time payments are meant to reward employees who perform well, so make sure you understand how your employer measures your performance and learn what to do to improve it.
- Know your job market. Some employees are in a better position to ask for a raise than others. While those who work in homebuilding or mortgage lending may simply be lucky to have a job at all, labor shortages in areas like mining and oil drilling have forced companies like Freeport-McMoRan (NYSE:FCX) and Chevron (NYSE:CVX) to take extraordinary measures to find and retain workers.
- Be prepared. Don't just expect to walk into your boss's office and demand more money. Treat a salary meeting like any negotiation. Be ready to talk about your accomplishments and successes, and know what you're going to say about any challenges or problems you've faced. Also, learn what people at other companies make to get an idea of whether you're above or below the typical salary elsewhere. The more professional you are in your discussion, the more likely you'll get what you want.
- Money isn't everything. When cash is tight, your boss might not want to give you a raise. But you might get a better reception for something more intangible, such as flexible work schedules, working from home, or even shorter hours. Your employer may well like a solution that doesn't cost any money.
Above all, know yourself. Asking for a raise puts you in a confrontational situation with your employer, so if that will stress you out too much, you might reasonably decide that it's not worth it. But if financial concerns are causing you stress, you're actually doing your employer a favor by trying to resolve those concerns in a way that will improve your work performance. Good luck!
To learn more on handling your personal finances, find out about:
- How to make smart decisions about benefits and save hundreds;
- the hidden fortune within your paycheck; and
- what to do to stop living paycheck to paycheck.
