How Pay Raises Really Work (And How You Can Get One Faster)

Just about every employed person out there wants a raise. But beyond the annual three percent that some of us are lucky enough to receive lies a myriad of negotiations, compromises and bargaining that must happen in advance of any significant raise or promotion.

Although employees often like to entertain thoughts such as, “If my boss really valued me, she’d give me a raise without being asked,” it’s rarely that straightforward or simple. Here’s what happens behind the scenes:

Your Work Environment Sets the Tone for Your Raise

First, your work environment sets the tone for what kind of raise you can get. In the best case scenario, you have a manager who cares about your professional development and actively looks for ways to reward good performance. You also work for a company that is financially healthy and can afford salary increases.

Your Manager Makes the Case for Compensation

Next, your manager speaks to his manager about giving you a raise. Anticipating some potential bargaining, he cites a number at the very top of what he thinks you deserve. A boss who thinks you should receive an extra $5,000 per year will tell his manager that he thinks you deserve an extra $7,000. Your manager’s boss says that her boss and peers will discuss it in four months (or at the next review cycle, etc.).

The Senior Team Discusses Company-Wide Raises

When the time comes for the discussion meeting (assuming your manager’s boss remembers to bring it up), a group of senior managers will discuss why the nominated people deserve raises at that meeting.

The amount of money available for raises will be less than the amount of money being requested for raises. This requires senior managers to negotiate based on what they know of each employee’s impact to the company. If your manager’s boss doesn’t know who you are or anything about your work, she won’t be able to make a good case for why you should be one of the lucky ones. At this point, the $7,000 requested for you will turn into $5,000 that is discussed.

The Senior Team Negotiates Those Raises Down Further

Since employers want to provide meaningful raises, they will not necessarily split the amount available across all contenders. (Look, you all get an extra $1 this year!), leading some candidates to not receive a raise at all. After extensive negotiations the amount of your raise will become $3,500 (assuming the people at your supervisor’s manager’s level have the authority to determine your raise at all). Depending on your level in the company, and how large that company is, this process may be repeated a few times.

Take Your Raise Into Your Own Hands

While much of this process takes place outside your zone of control, there are a few actions you can take to help this process along and position yourself for the best possible raise.  

  • Manage your own expectations and ask early. The time to ask for a raise is not after you’ve been stewing about not being granted one for the past year. Plan to ask after you have made significant progress in your work but long before you’re in danger of feeling undervalued. Then be patient and wait for some time before the raise actually materializes.
  • Understand your company’s policy and philosophy around significant raises. Are they always tied to promotions? If so, ask your manager what skills or accomplishments you would need to receive a promotion. This will allow you to target your work and activities to the things that matter to your employer. If your manager says that raises are only given at certain times in the year, ask questions to find out if there are ever exceptions (and in what circumstances) or what things you can do between now and then to become a strong candidate for a raise.
  • Ask for feedback frequently. Does your manager have concerns about your work? What does she think is going well or poorly? The sooner you find out, the sooner you can address any roadblocks and the better prepared you’ll be when it’s time to discuss raises.
  • Do the legwork. Don’t put the burden of assessing and communicating your value on your manager; do that work yourself. Think of it as preparation for your future resume. Write in bullets and provide concrete, quantifiable examples of your work. The manager who goes into a salary meeting saying, “My employee developed a process to resolve customer complaints more quickly resulting in a time and cost savings of 20% and a customer retention rate improvement of 35%,” is much more likely to be successful than the manager who says, “My employee is really easy to work with and always turns in assignments on time.”

There’s no magic formula to guarantee a raise, but by implementing these steps you can take some of the ambiguity out of receiving your next raise long before you start feeling overworked and undervalued.