Salary Leverage: What You Really Need to Do To Get a Pay Raise at Your Company

by Kris Dunn | Posted | Career Management

Salary Leverage: What You Really Need to Do To Get a Pay Raise at Your Company

I had a sit-down with a friend last week for the second time. Great gal, obviously talented, but here's the rub:

She feels like she's dramatically under-compensated for the role she's in.

My friend (let's call her Sally) is really not qualified to make the determination of whether she's underpaid in her role. So I listened, and then I did some research.

It turns out that she's clearly underpaid by about 40% of what the market rate is for her role in the city in which she lives. Sally finds herself in this position through a series of events that many, many young professionals can relate to:

  1. She started with her current company right out of college.

  2. She was promotable — meaning she started from the bottom, now she's here (here being the position she's advanced to where she's underpaid.)

  3. When she was promoted to her current position, rather than valuing her at the market rate, the company gave her an 8% raise and reset her merit date. The same thing happened when she was promoted the first time. This means she's had two promotions in a short period of time and has only seen about a 20% increase in her initial earnings at the entry level.

All signs point to the fact that Sally is doing well from a performance perspective. But the people she works with know her as "young Sally", and think she should be happy to have the job. Her manager and her team are glad she's there, but they don't even know that they've got a problem with Sally.

The fact they don't know they've got a problem means one thing — making them aware of the problem is Sally's responsibility. It's all on Sally. She's wishing that someone would stand up and recognize. But the fact is, she'll be waiting a long time if she doesn't take action to negotiate a raise herself.

Welcome to the nasty world of compensation, young professionals.

Nobody cares about you and your pay to the same level you do. Well, maybe your parents, but they can't help you shake the organization into understanding the fact you're undervalued. 

Are you in the same position? Do you think you're underpaid and your company is using you (even if they aren’t consciously trying to do that?) If so, remember this quote to get in the right mindset to do something about it:

"It's not show friends, it's show business." ~ Bob Sugar in Jerry Maguire

Sally loves the people where she works. She hopes they'll see that she's underpaid. She's talked to her manager about it. Nothing has happened.

Nothing will happen until Sally finds some leverage in the outside world. The leverage she needs can't be found in compensation data.

Three things Sally needs to do to get an equity increase aka negotiate a raise

1. Sally needs to go apply for three or four similar positions at other companies, making it to the offer stage in at least two of those. The offers must confirm she could give herself a 30-40% raise by changing companies.

2. Once she has pending offers, Sally needs to have a high-quality conversation with her manager about those offers. She should emphasize that she loves working for the company and her manager, but the offers confirm that she's underpaid (this has to be true to go this deep in the conversation).

3. Sally must give her manager the number it will take for her to remain at the company. The number needs to be close to the offers. It's okay to discount, but if you're going to use this type of leverage to get paid competitively, don't discount the gap by 50% — you'll only get one opportunity to do this. Tell your manager you need at least 90% of what the best offer is to stay, but the fact that you'll take less money to stay shows how much you love the company — and your manager.

Sally's been waiting for someone to do something to get her a salary raise. She needs to look in the mirror. It's not show friends, it's show business. Nobody cares that she's underpaid but her. She'll have to take action to get it fixed.

The last note on this use of leverage is that if you act like you might leave, you better be ready to leave if you don't get what you need.

Otherwise, you're working for relationships, and you'll take what they give you. I'm rooting for Sally, and I'm rooting for you if you're like Sally.

But if you're unwilling to explore the market and use the salary leverage you create, you're probably fairly compensated.

Your Turn: Do you think it’s your role or your managers to ensure you’re paid fairly?

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