Negotiate a better pay rise on promotion

Strummer22

Hi all,

I am wondering if anyone has advice on how to negotiate a better pay rise on promotion?

My situation is as follows (figures approximate to give the gist, not exact):

I work at a well regarded consultancy firm (which has a decent profit margin, so isn't strapped for cash), in a sector where experienced workers are in high demand. As is pretty standard at consultancies, staff have a charge-out rate and log their hours for budgeting and invoicing, etc. I just got a promotion (very happy about that :beer:). My salary review letter says only positive things about my performance, and awarded me my contractual bonus, plus an additional bonus - again, all very positive. It's worth noting at this point that the charge-out rate for my new level is about 23% higher than my old level. That's why I consider the increase in my basic salary of about 5% to be quite miserly and a bit demotivational - especially considering that the general increase for all staff (i.e. those not promoted this year) is about 3%, so in reality my pay rise on promotion is just over 2%.

I am going to bring this up with the MD. In the first instance I'm planning on just discussing my performance and the general value I bring. However, I have more specifically worked out how much more we could potentially invoice based on my new charge out rate, and how much of that goes in my pay packet and how much goes to the company, assuming I'm able to charge a similar number of hours - and the split is about 7% to me and 92% the company (and a little bit on National Insurance). So it's not at all like they couldn't afford to pay me more. In essence I think I was either previously overpaid or am now underpaid. I think a 15% pay rise would be justified and at least 10% would be fair.

Does anyone have experience of these kind of negotiations and do you think I have a strong argument, or any chance of success?

TELLIT01

It's not uncommon for people to be promoted to a higher grade and actually get no pay increase. If the pay bands for the grades overlap, and you are already within the band for the new grade there is no automatic entitlement to a rise.
You are now at the lower end of a new role and presumably still have a lot to learn. If you are going to raise the question of your salary, I think it would be better to approach it along the lines of asking if remuneration will be reviewed after 6 months. That's likely to go down better than complaining about not getting a large enough rise now. I certainly wouldn't go in spouting figures about how much they charge and how little of it you get. Business is there to make a profit, often for the shareholder, not to pay out a defined % to staff.

As for strength of your argument - very weak. You have presumably already accepted the promotion so the assumption will be that you were happy with the figures provided at that time.

Strummer22

TELLIT01 wrote: »

It's not uncommon for people to be promoted to a higher grade and actually get no pay increase. If the pay bands for the grades overlap, and you are already within the band for the new grade there is no automatic entitlement to a rise.

There are no published pay grades so I have no way of knowing.

TELLIT01 wrote: »

You are now at the lower end of a new role and presumably still have a lot to learn. If you are going to raise the question of your salary, I think it would be better to approach it along the lines of asking if remuneration will be reviewed after 6 months.

Undoubtedly plenty to learn. I would be open to a salary review after 6 months.

TELLIT01 wrote: »

That's likely to go down better than complaining about not getting a large enough rise now. I certainly wouldn't go in spouting figures about how much they charge and how little of it you get. Business is there to make a profit, often for the shareholder, not to pay out a defined % to staff.

The company is mostly employee owned so shareholders mostly = employees. I haven't had the opportunity to buy any shares yet though.

TELLIT01 wrote: »

As for strength of your argument - very weak. You have presumably already accepted the promotion so the assumption will be that you were happy with the figures provided at that time.

I was told I was being promoted at my appraisal, the figure was not mentioned at that time (and my line manager doing the appraisal is actually not privy to my salary info). Only found out the figure on Thursday.

jonnygee2

However, I have more specifically worked out how much more we could potentially invoice based on my new charge out rate, and how much of that goes in my pay packet and how much goes to the company, assuming I'm able to charge a similar number of hours - and the split is about 7% to me and 92% the company

So your argument to the MD is that the business is earning a lot of money by not paying you more? Not sure what kind of consultant you are but your basic grasp of business seems flimsy. Also have you calculated pension, tax (yours and the businesses), benefits etc into this or are you just working off raw salary/billing numbers? Have you calculated the effect on their GM? You are going to look like a right mug walking into the MDs office with a load of shoddy calculations!

You need to concentrate on your skills and knowledge, particularly any feedback from clients or successful projects that show how valuable you personally are. I'd also echo your long term commitment to the firm. Perhaps offer to agree to higher performance targets based on higher pay?

Strummer22

jonnygee2 wrote: »

So your argument to the MD is that the business is earning a lot of money by not paying you more? Not sure what kind of consultant you are but your basic grasp of business seems flimsy.

Well of course if I'd work for free they'd make even more money wouldn't they? And if I feel like I'm not getting sufficiently rewarded for the extra income I know I'm generating, I may leave the company and they will have to find a replacement for me, including all the associated costs.

My argument is that the value I bring to the company has increased, and this is not reflected in my remuneration (in my opinion - assuming the MD disagrees, I hope he can give me satisfactory reasons why).

jonnygee2 wrote: »

Also have you calculated pension, tax (yours and the businesses), benefits etc into this or are you just working off raw salary/billing numbers? Have you calculated the effect on their GM? You are going to look like a right mug walking into the MDs office with a load of shoddy calculations!

As I said, I'm not going to be presenting the MD with my spreadsheet. I'm going to have a discussion with him (he's a nice guy). Besides, the tax I pay makes absolutely zero difference to the company's margins. How could it?

I have taken those items into account as much as possible, but not fixed cost overheads as a) I don't know what the costs are and b) the costs are the same regardless of my salary. I also have no idea whether the company now has to pay more for my serious illness or death in service benefit cover so again cannot take it into account.

jonnygee2 wrote: »

You need to concentrate on your skills and knowledge, particularly any feedback from clients or successful projects that show how valuable you personally are. I'd also echo your long term commitment to the firm. Perhaps offer to agree to higher performance targets based on higher pay?

No doubt. The calculations were more to convince myself that I am indeed valuable to the company - to my mind they demonstrate this comfortably. I have positive internal and external feedback that I will be bringing to the meeting. The most likely thing I will be told is 'you're doing great - but we can't afford to pay you more', which I know is simply not true, otherwise employing me would have lost the company money last year!

theoretica

Stu_N_ wrote: »

My argument is that the value I bring to the company has increased, and this is not reflected in my remuneration (in my opinion - assuming the MD disagrees, I hope he can give me satisfactory reasons why).

Will you also expect a pay rise in years when your total billing does not increase? Think about that argument too.

jonnygee2

Besides, the tax I pay makes absolutely zero difference to the company's margins. How could it?

I mean the tax they pay on your salary, not the tax you pay!

Anyway, generally I the point was - the MD's remit is to increase returns to the shareholders, not to spread any gains across his staff, so to him the situation of making more profit from you looks great. I'm sure there are other people who he could promote to whatever you are now and charge a bit more for.

I basically just shows a bit of naivety to think that walking your MD through his own profit model is going to help your case. Be careful not to mistake a negotiation with an argument - what is 'valid' is not the most important thing here. If he says he can't afford an increase I'd take that as a gentle way of letting you down, rather than something to contest.

It's unlikely you will get a raise in the meeting (but you never know!) - unsurprisingly managers generally don't want to encourage people knocking on their door asking for money. And you don't get to be MD of a consultancy firm without negotiation skills and a firm hand.

But, still, making them aware of the fact you are after a bit more money can make them more inclined to give it to you to retain you in the long run, plus in some environments (like consultancy) having the balls to ask is often seen as a positive. But just focus on why you specifically are more valuable to them and what you will bring, your skills etc - leave the financials at the door.

Strummer22

Yes, I took into account employer's NICs.


You say "unsurprisingly managers generally don't want to encourage people knocking on their door asking for money", but the salary review letter finishes with 'if you'd like to discuss, please come and see me.' So the invitation is there. It may be as a courtesy but I'm a very straightforward person so will gladly take him up on the offer.

Les79

It does tickle me reading posts like this one...


No harm in asking for a payrise. If you don't ask, you don't get.


But it tickles me because of how comfortable you appear to be in this job/career! Sort of like being immune to getting made redundant etc and then finding that the job market is, in fact, tougher than you think. Or the possible impact of Brexit uncertainty and how that might fit in with your line of work (and whether bosses would be reluctant to agree wage increases right now).


I would suggest that you, at the VERY LEAST, do some homework on the "going rate" at other firms. How much do people in your position get for similar work? Also, to check briefly HOW FLUID the job market is right now; if you were to look for a job tomorrow, would you get one relatively quickly (and for the amount of money you want)? Supply and demand is a great economic concept and figuring out whether there is more supply (people with your skills/experience) or demand (jobs which need filling) and is often the key in cracking these discussions. Some bosses, with a surplus of supply, may see a pay increase request as akin to signing a resignation letter.

Strummer22

For my specialism, the job market is heavily weighted in favour of experienced candidates. There's a definite shortage. Jobs at quality companies are advertised for months because they cannot find the right candidate. I interviewed for my current job more than two months after it was first advertised; I don't actually know how many other people were interviewed.

I actually received an email on Friday from a recruitment consultant with three jobs at about my level. My new basic salary is approximately mid-range so I consider there is scope for improvement. It's not just the absolute amount, it's the 2.3% additional increase for a promotion I'm concerned about. IMO it doesn't bode well for reasonable increases if I were to achieve further promotions.

Exodi

I'd echo the response of leaving 'financials at the door' as, speaking personally, whilst I'd be receptive to discussing pay increases with my staff, should one of them decide to lecture me about costings (for which they couldn't fully understand) and in essence 'how much I'm ripping them off', I would immediately get defensive.

Mention the value you bring and the possibility of a reassessment of pay in the near future.

It's good advice to see what the 'going rate' is for people of your particular skill-set, but again, use this for your own knowledge to gauge whether asking for a pay increase is justified. Going into the MD flouting how you can earn much more somewhere else risks them saying 'go on then' or, even worse, if they can not increase your pay for other reasons, putting yourself in a dangerous position of classes as 'looking elsewhere'.

Good luck, but be careful!