My guide to asking for a pay rise when the cost of living is high

Friday, 29 April 2022

Our wages aren’t keep up with the cost of living, so should you ask for a pay rise?

Inflation is at a 30-year-high, and many people’s wages are no longer keeping up with the cost of living.

But data from job site Seek shows while half of those surveyed have negotiated their salary, 37% of people had never asked for a pay rise.

So, should you ask for a pay rise?

Financial commentator Janine Starks says you should.

“Both the public and private sectors now need pay increases that more accurately reflect both the inflationary environment and the position of their employer,” she said.

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“Right now every worker should be getting a pay rise at least in line with inflation.”

So, how much should you ask for?

Financial commentator Janine Starks says yes, you should ask for a pay rise.

To be in line with inflation, that is a smidgen under 7%, Starks said.

“We need to remember when annual inflation is running at 7%, you’ve already suffered it.

“Price rises have been incrementally gnawing at your salary for the last 12 months - the measurement is backward looking.”

Her advice is to aim much higher than what you think you should ask for.

“The Consumer Price Index (CPI) might be a perfectly valid benchmark, but it doesn’t always tell the full picture in a wage negotiation.”

Asking for a pay rise is all about timing.

In total, 42% of New Zealanders failed to get a pay rise in 2021, she said.

“The 58% who did, overwhelmingly got less than inflation…There’s an urgent element of catch-up at play. Our CPI may include the wildly irrelevant cost of vaping, but it fails to embed the rising cost of a mortgage.”

When should you ask?

Pre-warn your boss to make sure they aren’t caught by surprise, and ask at a time when your boss isn’t stretched or under pressure.

Considering that you’re in the right industry, whether your company is making money and has been passing on price rises from inputs, that your skill set is sought after, and whether your employer knows all that goes into asking, Stark said.

“If you are in an area of skill shortage, be honest about that and talk about the sorts of wages you are hearing about in the industry. Be very clear that you just want to keep up with the market, not jump to another company.”

How do you ask?

Being prepared when asking for a pay rise is the best thing you can do, while remaining professional.

“Make sure you are not demanding, just present the facts politely and point out you’re sure everyone is thinking alike given the current price rises occurring,” Starks said.

Do your research, so you’re well-informed about what others are paying, and wrap up your request with a request for a small promotion or the addition of some responsibility to show you want to keep pressing ahead in your career and view money and performance as a pair.

Continue to educate and upskill yourself, showing your employer they are getting more for their money.

Use your negotiations to get cost benefits. If work-from-home suited you and cut your transport costs, work this into your negotiations and maintain it for a portion of your week.

But you feel guilty for asking…

If you’re feeling any guilt about the timing of your request, stop it, Starks said.

“You’re already a year late and going backwards. A salary of $70,000 now has the purchasing power of a $65,000 salary.”

Workers are simply responding to another worldwide financial crisis - it hasn’t quite been given a name yet, but it will probably be called a “commodity crisis” or “the supply squeeze”, she said.

“Reduced supply of raw commodities is driving price rises worldwide and wage-earners can’t be expected to absorb that and take on the responsibility of inflation.

“Accepting that we are in the midst of a structural wage and price shift, is something we need to face.”

And if all else fails, it could be time to look elsewhere…

If standard pay negotiations don’t work, respectfully exit and keep moving during the next five to eight years, Stark said.

“While job-hopping isn’t good for the CV, the winners will choose their moves carefully and not get in a rut. At any life stage, it is important not to get wage gouged by a static salary and rising costs.

“This is your life and your financial security. If your skills are transferable, go.”