Pay Raise Roulette

Pay Raise Roulette

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Jill Wiltfong:

How to play today's pay raise roulette.

Deepali Vyas:

It's really a balancing act and it's almost a science.

Jill Wiltfong:

How much of a raise can a superstar get?

Deepali Vyas:

We're getting calls on this all the time. Are they demonstrating their value? Are they quantifying their contributions?

Jill Wiltfong:

How do you figure out how much to ask for?

Deepali Vyas:

The market has changed. The benchmarks have changed. There's so many people in my inbox, "Help me get a raise. Help me get a raise."

[Clairvoyant Cosmo]:

Welcome. You are in the presence of Clairvoyant Cosmo. My vision extends through time and space and beyond. What do you wish to know?

[Inquirer]:

Well, gosh, this inflation is killing me. between gas, food, and insurance, I could really use a raise right now. Will I get one?

[Clairvoyant Cosmo]:

Unfortunately for you, the average salary increase is expected to drop down to 4% this year.

[Inquirer]:

Oh, man. Can you really see all that?

[Clairvoyant Cosmo]:

No, I actually read that on Korn Ferry Insights. You know, as a businessman, you really ought to be up on it.

[Inquirer]:

Oh, right.

[Clairvoyant Cosmo]:

Oh, but does he think that there is a way to get more than 4%. Experts say, experts say...

[Inquirer]:

What? What do experts say? Hello, Clairvoyant one. Please tell me.

[Clairvoyant Cosmo]:

Oh, darn. We're out of time. It'll be a hundred bucks to keep going.

[Inquirer]:

A hundred bucks?

[Clairvoyant Cosmo]:

Inflation... (clears throat) I mean, inflation, remember?

Jill Wiltfong:

Hi, I am Jill Wiltfong, Chief Marketing Officer for Korn Ferry. And this is "Briefings," our deep dive into topics that corporate leaders need to care about. If there's any pattern to how the world is working out in 2024 for employees, it's that they certainly are feeling a financial squeeze. Promotions are down, healthcare benefits are costing more, and raises, well, they're projected to dip down to about 4% after a two-decade high of 4.4% just last year. Companies have their reasons; they're feeling the squeeze too from inflation and higher labor costs. But let's remember that most raises are handed from a pool of money companies set aside for them, and the prizes are not handed out equally.

Both top performers and, well, top negotiators with their boss will get more than 4% this year. Career and compensation experts say it's all about playing your hand right, so let's get to the bottom of this as we explore how to play today's pay raise roulette.

We're joined today by Deepali Vyas, a Korn Ferry Senior Client Partner and Global Head of The FinTech Payments and Crypto Practice.

She has a wealth of knowledge and experience on this topic, so I'm really excited to get her thoughts. Deepali, as always, thanks for joining me.

Deepali Vyas:

Thank you, Jill. Excited to be here.

Jill Wiltfong:

So, Deepali, before we unpack getting a raise in today's market, let's take a step back to understand the larger ecosystem. This past December in the U.S., wages and salaries accounted for about 70% of employer compensation costs while benefit costs accounted for the remaining 30%. How do companies arrive at that kind of 70 30 ratio?

Deepali Vyas:

First of all, there's a lot of regulatory requirements. Mandated benefits like social security, workers' compensation contribute to that 30% benefits portion. But that 70/30 ratio is a guideline, and it varies based on industry, size, location. So, it's really a balancing act, and it's almost a science when it comes down to it. And our very own, you know, comp and rewards practice does this on a daily basis for organizations.

Jill Wiltfong:

As I said before, the average raise may be about 4%, but we do know there's leeway, and we're going to talk a little bit about how to get a raise in a little bit. But first, like, how much of a raise, if four percent's the average, how much of a raise can a superstar get?

Deepali Vyas:

This is really interesting because we're getting calls on this all the time. And so, for determining those values, it really comes down to that employee. Are they demonstrating their value? Are they quantifying their contributions? What we've seen is that, you know, people are anywhere between those standard three to 5% raise percentages. However, those superstars can command anywhere from 10 to even upwards of 20%.

[Ramit]:

We think that the only way to ask for a raise is to just walk into our boss's office and put out our hand and beg for money. No, that's not how you do it. Six months before your next review, set up a meeting with your boss to lay the groundwork. You want to walk out of there with three specific things that you can work on, ideally, quantifiable, and then at the end you might say something like this, "You know what, I'm really excited by these goals. It helps me understand what it takes to make your job easier to be a top performer here at this company. Now if I hit these goals, I'd like to discuss a compensation adjustment. But for now, I'd like to just work on them and keep you updated." Bosses love this.

Jill Wiltfong:

That's Author and Finance Advisor, Ramit Sethi, talking about how to get a raise in your performance review. Deepali, the timing it seems like of when to ask is really, really critical here. Are there other times outside of a performance review that it makes sense to ask for money? When might that be?

Deepali Vyas:

Strategically timing your request is the biggest part of it. And I think you really need to understand sort of the company's situation, right? What's happening? Knowing market knowledge, knowing if there's a downturn. Is your company laying off people? What's the situation of the company overall before you think about sort of the timing of your ask.

Jill Wiltfong:

What about after a big win, something you've done that's really gone well. Is that the time to jump in and and make your case?

Deepali Vyas:

I would say that is the most strategic time. Here's what happens. Oftentimes performance reviews lag so far behind and so much time goes by, and it's always a, "What have you done for me lately," attitude, right? So, the one thing that you want to do is if there is a big win, you want to go in right away and say, "Hey, I've now set this up for the year. This is a very big win for us. And I do want to document the fact that it has come in, and I recognize that my performance review is maybe six months from now, but this has really set me up for success. And I really want to make a note that this is one of the key points that I will bring up during the performance review. And if I can get a salary increase based on my efforts today, I would appreciate it."

Jill Wiltfong:

You talk a little bit about salary ranges. How do you figure out how much to ask for? What's the right number or percentage, or how do you sort that out?

Deepali Vyas:

If you're going for that standard, you know, three to 5%, if that's what your company has given to you previous years but you've now exceeded expectations, the market has changed, the benchmarks have changed, you might want to go in and say, "You know what, I think I deserve a five to 7% raise." And I would say that between the data that we've been seeing, on average the higher performers are about 8.9% salary increases.

Jill Wiltfong:

What about inspiring stories of people that you know that did get a nice pay increase? Are there a couple that you can share that maybe we can learn from?

Deepali Vyas:

I had been advising this person for a number of years. So, they've been with their company since college and they were steadily rising in the ranks, handling global responsibilities, large teams. And they have been aiming for the VP title, which is a really big deal at their company where these titles are rare. They've consistently pushed for it over the last three years, but they never benchmarked their value until they got an offer from a competitor. And so that competitor offered them 35% more pay and a VP title. And I said, "Look, you need to go and use that and negotiate with your current employer." He got a call from the CEO last night and said that they were coming in within $20,000 of his request and the VP title.

[Julia Roberts in the ‘Erin Brockovich’ movie]:

I want you to know something, Ed. It is not about the number; it is about the way my work is valued in this firm. It's about how no matter what I do, you're not...

[Albert Finney in the ‘Erin Brockovich’ movie]:

As I was saying, I decided that the figure you proposed was inappropriate, so I increased it.

Jill Wiltfong:

That's Julia Roberts getting a way better than expected bonus from her boss, Albert Finney, in the movie "Erin Brockovich." Handing over a $2 million check is awfully nice, but that's a far cry from probably what most leaders can offer today. Deepali, if a salary increase isn't an option right now, what can firms offer to keep their top performers motivated?

Deepali Vyas:

Specifically in this market, I think firms can employ non-monetary incentives to motivate top performers. So, are they offering growth opportunities, flexible work arrangements, things for recognizing the employee amongst the organization? Are there team building activities, non-monetary rewards like extra time off or professional development funds, advancement, clarity. If there's no transparency in that or clarity around advancement, the organizations will fall short in retaining those top performers.

Jill Wiltfong:

Let's not forget about the bosses, because they sometimes want raises too. How would a senior leader approach this issue? Is it different for them? Does the compensation chess game change as you advance up the ladder, or not? What does that look like?

Deepali Vyas:

The higher you go, the more embedded you are in the organization. And the last thing that organization wants is your institutional knowledge walking out the door. When you get up to that, you know, leadership ranks that matter, you are going to have a collaborative approach on how you are going to basically think about everyone in the pool, not just you, right? So, when you have that mindset, the organization knows that this person is not just looking out for themselves, but they're looking out for the company. And once you are in this collaborative mode, it just becomes a lot easier to get what you want from a leverage perspective.

Jill Wiltfong:

I like it. It's kind of the we first, right?

Deepali Vyas:

Yes.

Jill Wiltfong:

That's really good, thank you. We know a lot of managers do wish that they had better news, I am sure, right now. But let's certainly hope some of this inside knowledge helps people come payday. I know there are a lot of people with their eyes on this goal for sure.

Up next, the must watch news in the business world from this week in leadership. So, stay tuned.

Rupak Bhattacharya:

Hi, and welcome to the break. I'm Rupak Bhattacharya, and here's a quick look at what else is happening in business from Korn Ferry's This Week In Leadership.

[Reporter]:

The so-called ‘sick note’ culture of Britain.

Rupak Bhattacharya:

Sickness has caused a record 2.8 million British people aged 16 to 64 to drop out of the UK workforce. The causes vary from long-COVID to mental health, and of course create more challenges for firms in an already tough economy.

[Reporter]:

Paying the price for rising inflation.

Rupak Bhattacharya:

Dining out costs 29% more than it did in 2019. But surprisingly, consumers continue to accept such inflationary price increases across this and other purchase categories. For corporate leaders, this may mean that discounting of products is not as important as maintaining quality.

[Reporter]:

The push by employers to bring workers back into the office.

Rupak Bhattacharya:

Firms with fewer than 5,000 employees are nearly three times as likely to require full-time attendance from their workers as firms with more than 25,000 employees. The figures suggest smaller firms can create such requirements because their return to office efforts appear to be succeeding better than larger firms.

For more insights on business and leadership, head to kornferry.com/insights. Thanks for watching.

Jill Wiltfong:

The Executive Producer of "Briefings" is Jonathan Dahl. Today's episode was produced by Rupak Bhattacharya, Nadira Putri, and Teresa Allan, and edited by Jaron Henrie-McCrea. It contains reporting by Russell Pearlman, Arianne Cohen, and Peter Lauria.

Our video segment contains original artwork by Frazer Milton, Hayley Kennell, Jonathan Pink, and Sasha Kostyuk.

Don't forget to read our magazine, available at newsstands and at kornferry.com/briefings. That's it for Korn Ferry's "Briefings". I'm Jill Wiltfong. We'll see you next time.

So let me ask you a question about that one, once my daughter walks across the floor, because I can hear, like, the whole house shaking.