Tighter Labor Market May Mean Fatter Paychecks

NEW YORK â€”  There is good news for folks planning to hit their bosses up for a raise: With the labor market tightening as unemployment remains low, employers may be willing to pay more to keep the employees they have.

The bad news, though, is that employees will still have to merit a raise and then build a solid case for why they should get one.

With that proviso, there are strategies to follow to improve your chances of winning a pay increase, say human resource managers, consultants and headhunters. The strategies not only make sense for boosting your income, they may also help you keep your job.

“People who get raises take on broader responsibilities than expected and do a terrific job following them out,� said Pete Lupo, principal at William M. Mercer Inc., a human resources consulting firm in New York. “It’s not only the best way to get a raise, it’s also the best way to secure your job.�

Counting on wage inflation to lift your pay may be the wrong strategy. A William M. Mercer survey of 2,500 companies representing about 10 million employees found that the average raise budgeted for 1997 will remain about the same as last year’s: 4.1%.

The Effects of Inflation

The survey also found that while the size of annual pay raises has leveled off, the rate of inflation--as measured by the consumer price index--will climb to a projected 3.4% in 1997 from 2.5% in 1994. The shrinking gap between pay increases and inflation means that workers are getting less bang from their new bucks.

Still, companies remain committed to keeping prized employees. With the unemployment rate hovering at a seven-year low of 5.2%, businesses are being forced to pay more to attract new workers. Therefore, some companies may decide that their best existing employees are worth more as well.

“Corporations don’t want to lose good workers because of money,� said Carlo Martellotti, senior vice president and managing director in the Chicago office of Drake Beam Morin Inc., a management consulting firm.

Employee compensation experts say there is never a bad time of the year to discuss a raise, though workers shouldn’t expect even a valid request to be automatically granted. Planting the seed in your boss’ head a month or two before an annual review or shortly after you’ve won the company a big piece of business will allow a supervisor to allocate a worthy increase whenever the annual budget is set.

Get the Facts

Do some homework before meeting with your boss. Employees in big companies have many sources they can tap--including human resource workers and trusted colleagues--to learn what size of raises are customary for different types of workers and performance levels. Such information can save an employee the embarrassment and potential harm of making an outlandish request.

“Your credibility is impacted� if your request is off-base, Martellotti said.

“If you’re in the top pay range at your firm, you may be bucking up against something that’s difficult to push,� Martellotti said.

Employees at small companies may have only their bosses to draw off of when gathering intelligence about compensation levels. But it isn’t unreasonable to ask the head honcho what level of performance warrants what type of salary increase, human resource professionals say.

And while the purchase of a home, the birth of a child or impending college tuition bills may create a need for additional income, they don’t qualify as reasons to ask for a raise, experts agree.

“I would never ask for a raise under those circumstances,� said Barry Hoffman, director of key executive services in the Stamford, Conn., branch of Right Associates, a Philadelphia-based outplacement consulting firm.

Bosses who grant raises for reasons unrelated to performance are then obliged to follow suit with other workers, he said.

What’s Your Worth?

The trickiest part for a worker seeking a raise can be to value his or her worth. But just as when you’re selling a home or a used car, the best way to come up with a price tag is to solicit some bids on the open market.

That’s why it’s helpful to keep a current resume and continually develop contacts in your field. Also, trade journals often list job openings and salaries.

Getting a bead on your worth in the industry should be handled discreetly, however.

An employer may see secretive discussions with competitors as an act of disloyalty or conflict of interest.

Union members face an additional hurdle. Their raises may be set by a labor contract. But that doesn’t mean an employer can’t be persuaded to grant a bigger increase.

In any case, employees have to show they are directly contributing to the organization’s bottom line, experts say.

Whether that’s exhibited by selling more widgets or finding ways to save money making them, keeping a track record and periodically briefing your boss is vital.

Also, workers who show curiosity about the company’s overall business and enthusiasm for their jobs are most likely to get raises, experts say, because those traits are highly valued by employers.

The Downside of a Raise

“Hard work is always the key factor when deciding whether someone’s worthy of a raise,� said Hoffman.

Before deciding whether to ask for a boost in pay, it’s worth considering the potential downside if you succeed. A higher salary tends to carry with it more accountability and higher expectations from your boss.

If you prize your time away from work, accepting a raise, and the additional responsibility that it implies, may mean you’ll have less free time. And depending on the work environment, your raise may cause resentment among colleagues.

“If you’re going to seek more responsibility, you ought to feel good that you will be able to take it on,� Lupo said. “It can backfire.�