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As 2022 comes to a close, high inflation and headlines about company layoffs are keeping some people on edge. But if you dig just a little deeper, the job market appears to remain strong. There were plenty of openings in most industries at the end of the year, and average wages actually rose in November 2022 when adjusted for inflation.
Things could take a turn in 2023, of course, but it's helpful to remember that workers have bargaining power even when the headlines are scary. Understandably, asking for a raise can still be uncomfortable. But people get raises during booms and busts—taking steps to prepare and support your request could be the key to your success.
1. Start the Discussion Early
While you might want a raise today, timing your ask can be important.
Try to bring up the topic several months before a quarterly or annual performance review. Take this opportunity to explain to your supervisor that you're hoping to get a raise and ask what would need to happen to make sure you get one.
Your supervisor's response might depend on factors outside of your control, such as the company's overall success or the team's budget. But your contributions to the company's well-being could also be a factor. Either way, getting the conversation started makes it easier to follow up down the line. If you've done what they've asked for in the interim, then you're simply asking your manager to follow through on their word.
The timing of your conversation also plays a role. You might want to align your ask with your company's budget cycle or wait until you've done a good job on an important project. After all, even if your supervisor is on board, their hands may be tied if raises are typically only given out during a certain time of the year, such as the beginning of a new fiscal year.
2. Record Your Accomplishments
While some employers offer an annual cost-of-living raise, you might have to make a case for why you deserve a separate raise that rewards your individual accomplishments. Instead of sharing a long list of everything you've done, try to highlight a few occasions or projects where you really went above and beyond.
Be ready to share details about what you did, how you did it, and why it was important for your team and the company overall. If your manager needs to ask higher-ups before approving a raise, they can make a more powerful argument if they understand the context of your contribution and the results it garnered.
3. Gather Outside Statistics
Knowing what other people with similar jobs or responsibilities get paid can also help you make your case. If you're underpaid, you might simply ask for an increase to match market standards. Even if you're not, you can use your research and list of accomplishments to explain why you deserve more than the average.
Good places to start your research could include sites that share anonymized hourly and salary info, including Glassdoor, LinkedIn, PayScale and Salary.com. A few cities and states also have pay transparency laws that require employers to include salary ranges when posting job openings. You can use these postings as benchmarks, although you may need to adjust your expectations to account for cost-of-living differences if you're applying to jobs in different locations.
If you want more subjective estimates of what you can earn, you could apply for other jobs and use your offers to negotiate a raise. But if you don't want to let your employer know you're looking elsewhere, an alternative could be reaching out to recruiters and asking how much someone with your experience could expect to earn.
4. Be Specific About What You Want
When you ask for a pay increase, get specific with the request and use your research to back it up. For example, you might find that you consistently exceed expectations in reviews but have a below-market salary. You could make the case that you deserve X% above the market rate.
But some companies are also feeling the strain of inflation and shortages, and may be trying to cut costs. If a pay increase isn't an option, come up with some alternatives that would make you happy, such as:
- More paid time off
- Flexible hours
- Remote days
- Stock options
- New bonus opportunities
- Financial wellness benefits
- More interesting assignments
It also may be easier to persuade the company to pay for career advancement opportunities than a raise. Having them pay for a career coach or continued education could help you qualify for a higher pay bracket or a higher-paying job later.
5. Have a Backup Plan
You might have tried your hardest and still gotten a "no" in response. Rejection can be discouraging, but feel out the situation and think through your options:
- Ask follow-up questions. Was that the final word or part of an ongoing negotiation? Ask about potential growth for your career and salary within the company and what needs to happen for you to progress.
- Earn a certification. If there isn't a linear path to progress in your current role, ask whether earning certifications could warrant more pay or help you move into a higher-paying career path at the company.
- Update your resume. If you're ready to leave your company, it might be time to update your resume and see if you can negotiate better pay—and potentially a sign-on bonus—at a different company.
- Try a side hustle. If you want to stay at your company but need an income boost, look into flexible side hustles that you can use to supplement your income.
You will also want to figure out what will happen to any employer-provided benefits, such as health insurance and retirement accounts, if you leave your job. Consider how all these changes will impact your finances and whether you can afford to leave right now or if you need to have another job lined up first.
How a Raise Could Impact Your Credit
If all goes to plan, your hard work will pay off and you'll be rewarded with a raise. Your income doesn't directly impact your credit score, and it's not part of your credit report. But it can impact your creditworthiness in several ways.
A higher income can make paying your bills easier and lower your debt-to-income ratio, which creditors may consider when making lending decisions. You could also update your income with your credit card issuers, which might lead to a higher credit limit. In turn, a higher limit can lower your credit utilization ratio, which could increase your credit scores.
If you want to track how these changes impact your credit, sign up for Experian's free credit monitoring, which provides a free credit report and score and alerts you when there are changes to your credit report.