As inflation continues to outpace wage growth, securing a pay rise may be the best way to keep up with the cost of living. But how do you go about achieving one?
The latest official data from the Office for National Statistics (ONS) shows the inflation rate slowed from 8.7% to 7.9% in June.
But the latest salary data from the ONS shows average wages, excluding bonuses, were up 7.3% annually in the three months to May. That’s the highest rate on record, but still below inflation.
This suggests wages are still “not increasing fast enough to keep up with rising prices in the shops”, said BBC News. Regular pay actually fell by 0.8% once you account for inflation, the broadcaster added.
Should you ask for a pay rise?
While no one would turn down 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 said at the same event that public sector pay rises could also push up inflation as “more borrowing is itself inflationary”.
All of that said, delaying asking for a pay rise while inflation is high may be bad for your own pocket, said the i newspaper, as “employers will be welcoming it falling later this year”.
An “excess of [vacant] positions and a shortage of workers skilled enough to fill them” puts workers in a strong negotiating position, added the newspaper.
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.
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”.
Consider your timing
It is important to “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
Your employer doesn’t have to grant a pay rise, said The Daily Telegraph, and “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.
It may be tempting to threaten to quit if you don’t get what you want, but this is a “risky strategy”, said The Times Money Mentor. Instead, check if there are other benefits you could get to push up 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. See if they will invest in your professional development, as this may “improve your employability and earning power”.
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 newspaper, 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, added the i newspaper, employees have a “strong negotiating position”, so “don’t let your bosses forget it”.