Despite worries about the economy, today’s episode of Good Cents episode will convince you that now is a great time to explore your current pay options and maybe even negotiate a raise with your current employer.

We’re talking to Stephanie O’Connell, a finance expert, author, podcaster, and journalist. Stephanie’s advice for asking for a raise? Show your value. This episode will improve your negotiation skills, help you take control of your career, or be a helpful reference later on (so have a notebook and a pen ready!). 

Here’s a recap of today’s information-packed episode:

• Despite economic challenges, now is a good time to negotiate because there are many job openings. 
• To negotiate a raise effectively, it’s important to bring data from external sources as well as evidence of a job well done. Create a file of past accomplishments and tell stories showcasing your unique value. 
• Optimizing your job can lead to promotions and higher pay. Consider asking for on-demand pay during a raise negotiation. 
• Look for companies with supportive environments and join employee resource groups for better outcomes.

Have a financial question for us? Email  [email protected]. Don’t forget to subscribe on Apple, Spotify, or wherever you get your podcasts.

Listen below or read the transcript that follows. 

Eric Rosenberg:

This is a friendly reminder that today’s episode should not be considered financial or legal advice, and is intended for educational and informational purposes only. Thank you.

Hello, and welcome to the Good Cents Podcast, where we provide free financial tips to help you get ahead of your finances. Today we’re talking about how to negotiate a raise. Asking for a raise can be a nerve-wracking experience and it can be hard to know where to begin. But in today’s economy, it’s important to maximize your compensation.

At Payactiv, we’re committed to improving the financial lives of people everywhere. You can use the Payactiv app to get smart budgeting insights. It’s a great tool for measuring how price increases and inflation impact your finances, and can even help you figure out how much more you need to make at your job to maintain your ideal standard of living. Search Payactiv, that’s P-A-Y-A-C-T-I-V, in your phone’s app store to get started. Standard message and data rates may apply. And with that, let’s dive into today’s episode, Tips for Negotiating a Fair Pay Raise. 

All right, everyone. I am so excited to be here with Stefanie. I’ve known her a long time and she is definitely an expert in this topic. She is a vocal source of great information for women’s equal pay and women’s equality in the workplace, which is definitely a topic we need. And we’re going to dive in with a few questions. So thank you so much for being here and welcome to the show.

Stefanie O’Connell:

Well, thanks for talking about this. I’m glad we can have this conversation.

Eric Rosenberg:

Yeah, it’s such an important topic and a lot of people are just so nervous to talk about paychecks at all and income at all. So once we break through that taboo, it’s really easy to see the data on this problem. It’s been a longtime problem, there’ve been periods of progress and periods of backwards momentum, COVID and all that definitely mixed things up. So one thing that is really important for a lot of people to do regardless of gender is negotiate a fair compensation and a fair wage, or whatever your pay rate and compensation package look like. So that’s something all people should learn from. But because of this big gap that women are facing, we want to take extra time to highlight what women can do to negotiate that better pay package so they can at least equal what their male counterparts are getting, or if their super rock stars, make more because they probably deserve it.

So we’ve seen mixed messages recently about where the economy is going, so that might make some people nervous to negotiate and we have future uncertainty. So why, even with economic challenges, do you think it’s a good time for someone to negotiate a fair raise or a fair salary?

Stefanie O’Connell:

Well, I think just to speak to what you said about economic challenges, the headlines really do sound scary, but I think it’s important to parse what the headlines say about layoffs from what’s really happening on the ground, which is the fact that the labor market’s still pretty tight. There’s a lot of people who are still hiring, there’s more job openings than workers in a lot of places. So I don’t want anyone to get too nervous about something like negotiation because of those headlines. It’s really important when you hear some kind of narrative like, “Oh, there’s layoffs everywhere,” maybe double check first because that might be the confidence boost that you need to say, “Actually no, people are hiring and this might be a chance for me to negotiate at a perfect time.”

So I think that’s first and foremost. But even in a time where the economic landscape isn’t necessarily as good, I’m always a fan of salary negotiation, as long as you understand and can accept the risk of something going wrong. And I don’t want to say that things going wrong in a salary negotiation is something that happens often, but it can happen and I think it’s important to acknowledge that risk, but also just understand it as one of many risks. Continuing to make what you make for the rest of your life is also a risk. And so I think it’s important to frame risk more broadly than just hearing no, or even if something happens such that your negotiation goes poorly and you face some kind of penalties or backlash, which can certainly happen to women at work, marginalized workers, people of color at work, this happens often.

But again, remember that risk can happen in a lot of ways, and one of the ways to protect yourself against that is to diversify. Think not just about the negotiation you’re having in your current job, but where you could potentially find new opportunities elsewhere, and leveraging the full scope of opportunity in the employment landscape rather than just one singular opportunity.

Eric Rosenberg:

Now, that’s a great take. I like the idea of looking at your whole career, not just where you are today, because as we all know, most people these days are not at one employer forever and it’s very common to move around. And some people even, most people would see a reduction in their lifetime earnings if they stay at one employer too long. So it’s a very good thought to be looking forwards in your career beyond just today. That’s a great tip and a great perspective.

Stefanie O’Connell:

And to your point there, there’s a lot of new data around that shows a lot of people going from job to job wind up now making a lot more than if they had gotten incremental raises at their existing job. Of course, it depends on your industry, it depends on what kind of opportunities are actually available. But again, it’s just thinking more about always be looking, always keeping your options open. And that way, if something does go wrong in a current workplace or with a job offer that’s right in front of you, you always have more options available.

Eric Rosenberg:

It’s great to have a backup plan. In life, we always need backup plans, that’s why we have emergency funds, as we’ve talked about in the past. Having a good open career network is a great idea, kind of like an emergency fund for your career. It’s a great asset to have for sure. So let’s say you have your confidence and you’re ready to go talk to your boss and say, “I want a better salary.” I imagine that’s not the exact words you should walk in and say. What would you recommend as the first steps when someone’s trying to negotiate a fair raise?

Stefanie O’Connell:

I think the first thing to do is really get a picture of what the landscape is in terms of the pay structure at your company, within your industry more broadly, within the city or area of the country you work in. I think getting as much information as possible allows you to walk into any negotiation with a lot more power and a lot more confidence. So one of the great things now is that a lot more information is easily accessible online. You can find salary ranges sometimes listed on job postings, you could find the hourly pay. Even if salary transparency is not mandated where you live, it might be mandated in another state. So if your employer operates across state lines, you can see what they’re paying somewhere else. Of course, where you live could affect how much you earn, but again, it’s just another data point. So I like to get as many data points as possible.

You can also check out websites like Glassdoor or PayScale, you can check LinkedIn, see if you can connect with other people who’ve worked in the industry and if you have any trusted relationships there, you can get an idea of what the pay structure looks like, how it’s determined, who are the kinds of people who rise up and what did they do to get those promotions and to get those raises. As you collect more and more of this information, you’ll be able to start piecing together a really reasonable salary range that you can ask for or salary increase that you can ask for. And then I think your next step is to really have some proof points to put behind it. What is it that you’re going to bring to the table or that you’re already bringing to the table that goes above and beyond your current compensation? And just like you look for data points to figure out how much you should ask for, you should also look for the data points that are going to justify what you ask for.

Is it how much you’re contributing to the company’s bottom line? For example, if you work in sales, this is a really easy case to make. If you’re exceeding your sales goals by a certain percentage, you can say, “Hey, I’m hitting my targets, I’m going above and beyond and I’d like my salary to reflect the added value that I’m bringing to the company.” But maybe it’s not something that’s as tangible as that. Maybe the way you bring benefit and value to the company is on a productivity measure, or maybe it’s on an employee happiness measure or a morale measure. So collect all kinds of different data points. If you can, also bring in some anecdotal evidence. If you have an email from somebody or a note from a boss that said “This was such great work”, save it in your inbox and keep a little folder of all the times you’ve gotten great feedback so that when you do walk into your negotiation, not only are you bringing the data points that you’ve researched, you’re bringing in the data points of your performance, but you’re also bringing in a story.

It’s good when you say, “In this specific instance, this project, this person said these words.” That really humanizes what you’re talking about and brings this experience of the value you are bringing to the company that’s above and beyond your current compensation to really hit home with whoever you’re speaking to.

Eric Rosenberg:

Yeah, that’s great advice. One way that I like to always keep track of things that I might want to have in my chest when I was ready to go up and say, “Here I might be ready, time for a raise,” is I’d keep a file on my computer, it was just a Word document, that I called Big Wins. And anytime I had a big success, I would always just make a bullet and just write a sentence or two about what happened. So then when my quarterly or annual reviews came around, I could pull that up. And when I’m filling out my self-review, I could say, “These are some major accomplishments I’ve had in the last little while.” And being a finance guy, I always knew the dollars and cents, what those were worth too. So the more you can prove that value that you’re bringing to the employer, I think the more likely they are to be amiable to giving you a potential raise.

So that’s great tips. And I also want to emphasize that you can find a lot of that salary data out there. You mentioned a couple of websites that you can go and find what the exact average salary is for everybody who’s doing your job at your company if it’s a big enough company. So those are really good data points to have when you’re sitting down with a manager. All right, so here’s another question for you. How can someone effectively communicate their value to an employer during a negotiation? I know we just talked about this a little bit, but if we could get more into the details, maybe give an example of how someone could say to their boss, “This is something I do that generates value for the business,” if that’s not part of their regular vocabulary.

Stefanie O’Connell:

So I know I mentioned it a little bit in what we just spoke about, but I think if you can tell a story with whatever case you’re making to your employer, it really helps drive your case home. So this might be something where you’re dealing with a specific client interaction and you had an objective with the client. And not only did you meet the objective, but your relationship with the client then brought in extra business that wasn’t originally part of the scope of work, and then they connected you to three other clients who then you signed and then that expanded the company’s network and the billings to the company by a factor of maybe five times what you were originally targeted to sign. I’m speaking in really generic terms because for everybody it’s going to be really different, but I think this is the kind of case study you can think about. What are the case studies of your career? We talk about large scale data points, the average for my industry, but then the micro data points.

And that’s, “In this instance, I brought this money, I brought in this relationship and I brought in this potential for future relationships.” And even if you don’t have something, like I said, where it’s so clear, like a sales number that you can say, “Obviously I exceeded this,” you can also forecast ahead. Look at the value you’ve brought in terms of potential to the company. And it’s not always easily so measurable. Sometimes it’s in the form of relationships, sometimes it’s in increasing employee retention. It might be all different kinds of metrics, but think about what are the metrics of success in your job and what are you doing to meet and surpass those metrics? And for every person, it’s going to be different. And so the case that I might make for more money is not necessarily the case my colleague’s going to make for more money because our metrics of success at the company depends on our roles, and then of course the unique value that we bring to them.

Eric Rosenberg:

Yeah, this has to be thinking about all the different jobs I’ve had over my career. When I was early in my working life, when I was in high school, I worked at a big retail store, one that everybody’s heard of. And one thing I like to do is always try to set the record for the most store card signups. And now I know how that’s not so great for everybody, but at the time, that was my business goal, that’s what the company wanted to do. So I kept track myself in addition to the tracking that the store did. So if I was ever talking to my manager, I could say, “Yeah, here’s the number I’ve generated,” and things like that. If you can save the company money, it’s often just as important as making more money too. So think about processes, things you do every day. If you can find something you do every week that you could save a couple of hours on, that adds up over months and years to a huge value to your company. So every little improvement that you can come up with, definitely take note.

Stefanie O’Connell:

And tracking those improvements is also a case for a potential promotion. If you’re finding a way to optimize your job so well that you’re actually optimizing the system in and of itself that says, “Hey, I’m not just this, I’m management material.” And that then puts you into another salary band altogether.

Eric Rosenberg:

Yeah, and that’s great. When you can move up to the next salary level or salary tier at your company, however they organize salaries at bigger companies, that’s a pretty common way to organize how workers are compensated. I mean, yeah, that can lead to a big raise. One time I got bumped up from the first level to the second level when I was early in my career, and that was, as a percent, one of the biggest raises I could have imagined. It was great. So definitely listen to Stefanie’s advice there. We mentioned, you said at the beginning, sometimes salary negotiations can backfire or things can go wrong. Could you share a little bit on common mistakes people make when negotiating and how you might avoid those?

Stefanie O’Connell:

So whenever you’re walking into a negotiation, you really want to avoid overpersonalizing, and I don’t mean this in the sense of, I just talked about storytelling and using your own data points, that is obviously very individual to you, but it’s not the same thing as saying, “Well, I’m really going through this right now,” or, “I just had a baby,” or whatever it is, which is a legitimate reason why you might be seeking to make more money, but it’s not a reason for your employer to pay you more money. And that’s an important distinction. Of course, I want to make more money, but if I’m not bringing added value to my employer, my desire or even need to make more isn’t really relevant to the conversation around my income. So I think it’s really important that we stay focused on the metrics that really matter from the employer’s perspective, even if they matter from our personal perspective, we just don’t bring them up in the context of the salary negotiation.

I also think experience can be an important metric, but I think sometimes we over-index or rely too much on talking about our experience because experience without performance or experience without a clear metric that says, “This is the value I’m bringing with this experience,” is really just arbitrary, it’s just an amount of time you’ve been somewhere. And if you don’t have a performance record that goes along with that, that’s when relying too much on experience isn’t that compelling of a case. Of course, it saves the employer money if they don’t have to deal with constant job turnover. So in that case, there’s something to be said for experience, but I think relying too much on that alone can be tricky. And of course, coming prepared. You don’t want to come in without having done this market research first about what is a reasonable amount of money to be asking for, and you don’t want to come in without feeling prepared, having rehearsed what it is you’re going to say so that you don’t wind up speaking, blabbering to fill the silence and undercutting your own ask.

Eric Rosenberg:

Yeah, that makes sense. So we’ve talked mostly about the dollars and cents in your paycheck, but there’s also those other parts of your compensation, things like vacation time and other perks and benefits. What are some other areas that you think people should think about when they’re looking at negotiation beyond their paycheck?

Stefanie O’Connell:

Well, just like we were talking before about thinking holistically about our options when we’re thinking about negotiating not just the opportunity in front of us, but the full context of what’s possible in our careers, I think the same thing applies when we’re talking about income and negotiation. That’s just one piece of the bigger equation. Your compensation package can include your benefits, it can include, as you mentioned, vacation days, paid sick leave, it can include continuing education, it can include potentially some amenities. So think about what it is that you want to achieve from your salary negotiation that extends beyond income. Is it that you need more flexibility in your schedule so that you can get to elementary school pickup at 3:00 PM? Because there might be room for that in this conversation too. And there might be a way of what’s called shaping your negotiation or bending a “standard company policy” to make things work for you in a way that brings you value that isn’t just about the money.

Yeah, the money matters, but as any parent who needs to get their kid from elementary school knows, being there for pickup matters too. So it’s important to weigh the full value of what you need from the employer as much as what they need from you.

Eric Rosenberg:

Yeah, that’s great. And something else to think about, you can sometimes suggest a benefit to an employer if it doesn’t exist. Maybe that’s a subsidy for your public transportation pass and your employer might be able to get a tax break for doing that and help you get a discount. So that can be a win-win. Another one that we really like at Payactiv is early access to your earned wages. So if rent’s due and payday is not till Friday, but today it’s Wednesday, and you need to come up with that check, rather than going to a payday lender and paying these exorbitant fees, some employers work with Payactiv and offer this at no cost that you can click a button and get part of your paycheck early. And there’s no loan, there’s nothing to pay back. So that’s one to ask about if your company doesn’t already offer it.

Stefanie O’Connell:

One of the other things that I like to think about when I think about what I want to negotiate, again, is, to your point, looking around at what other people are offering. Just like salary transparency is making the numbers more accessible, so are the conversations online about what benefits are available. So there are benefits I had never heard of, but because I’m constantly on the internet, I now know, oh, some employers are offering to help you pay back your student loans. Well, what does it look like for me to bring this up with my employer? To your point.

Eric Rosenberg:

And student loans are growing and popularity benefit, student loan assistance, because as we all know, student loans can be very expensive for a lot of people. And if those monthly payments are taking up a huge portion of your income, getting a little relief there with your employer’s help could make a big difference in coming up with the money for rent and other bills that you need to cover. One data point I want to mention, which it always breaks my heart to read, and I’ve two daughters, so I’m always wanting to see gender equality for their future, women earn, according to this last study we saw, about 83 cents for every dollar a man makes. So what specific tips do you have for women, for female listeners, that are separate from what men might consider so they can potentially overcome and make up ground on this underpayment problem we’re seeing?

Stefanie O’Connell:

I think the first thing to understand is that just that these pay gaps exist, and it’s often a matter of things that are happening, dynamics, social dynamics that are happening within companies and even beyond companies in the world more broadly, that we can do our best to try to remedy. But if it doesn’t work, I don’t want anyone to internalize this as it’s something wrong with them. “I tried to negotiate my salary and my employer got mad at me.” No, it’s not you, there’s nothing wrong with you if that happens. This is all part of what contributes to the gender pay gap, and I think that’s an important context to understand. Also important to note that when gender and race meet, women of color experience even the larger pay gaps than that 82 cents, you have Latinas who are making 54 cents on the dollar compared to white men on average. And again, it’s not something that’s wrong with what these women necessarily are doing, it’s much bigger than that.

That’s said, even if you’re aware of what’s happening here, I think this really highlights the importance of diversifying your opportunities, as we talked about earlier, when it comes to salary negotiation, because it’s hard to know which environments are going to be the ones that are going to be supportive of you as a woman or as a woman of color or however you identify, and which ones are going to maybe penalize you because you’re behaving in a “masculine” manner and only “men” are supposed to aspire to leadership roles. Of course that’s not true, but these are the subconscious biases that trigger backlash when women do speak up or ask for more or assert themselves. So the one thing I like to look out for are like, where are the environments at work in which people like me are advancing? Is this company only dominated by people with Harvard MBAs in Management?

Eric Rosenberg:

I like that you mentioned don’t internalize and blame yourself for bad company cultures.

Stefanie O’Connell:

Yes.

Eric Rosenberg:

Or problems you run into. When I left one of my early jobs, one of my first jobs I had after college, someone reminded me there’s a lot of companies out there and this was just your first job. Everybody has a lot of opportunities. Just because one place isn’t the right fit for you or you just because you had an bad experience at a couple businesses in one industry, doesn’t mean you can’t find something else where you can thrive and be happy and get the compensation you deserve.

Stefanie O’Connell:

I wanted to add just another tip is that a study came out that showed that individuals who are typically marginalized in the workplace, like women, like women of color, if they have access to networking both within their company, just the standard usual go-to networking, along with a specific women’s only or person of color only employee resource group, they have better outcomes than people who don’t have access to those additional networks of women-only networking or person of color networking or LGBTQIA networking or whatever. And what that really speaks to is this idea that when you have these protected spaces in addition to your regular networking spaces, it gives you an opportunity to talk to other people who are experiencing the workplace and the unique challenges that come up as a result of your identity as a marginalized person within that workplace.

And it gives you strategies and safe space to talk through dealing with it. Because the reality is, two people can express the exact same behavior, but if it’s a man or a woman or a person of color versus a white man, they could have a completely different response to their behavior. So it’s helpful to have those other people who share your experience somewhere in your professional network, whether it’s in your current company or outside your current company, but somebody you feel that you can trust and talk to about these things. It’s really helpful to have somebody as a sounding board to talk through those specific issues, and it shows up in the data that it really works.

Eric Rosenberg:

Yeah, that’s a great tip. And if you work for a medium to large size company and that doesn’t exist, that could be one of those benefits you ask for that doesn’t really cost the company much of anything, other than a little bit of time to let everyone get together and network and brainstorm on how to make the company better. And that’s probably really a win-win for everybody because it makes you want to be there more, it makes it a better place for everyone to work. So that’s a great way to wrap it up on that positive note. Make sure you speak up for what is right at your company if you have the stand on your own feet, there’s always some risks involved with speaking truth to authority and truth to power. So you have to read your management relationship and your company culture. But if you’re not at a place that’s ideal for you, it’s always okay to move and find somewhere that is better.

So these were all great tips. Thank you so much for sharing your time and your knowledge and your thoughts with us. Stefanie, if anyone wants to follow you and learn more about what you’re doing, where should they go?

Stefanie O’Connell:

Yeah, I’m @stefanieoconnell on Instagram, so from there you’ll be able to find all my other stuff. My newsletter is called Too Ambitious, you can find that through Google too.

Eric Rosenberg:

I’m a subscriber, I love reading everything you put out. I’m a big fan. So definitely check out what Stefanie’s up to. It is absolutely worth it. Thank you so much for spending the time with us today, and we will talk to you later. Have a great day.

Stefanie O’Connell:

Thank you.

Eric Rosenberg:

That’s all for today’s episode. Thanks for listening to the Good Cents Podcast. Don’t forget to subscribe and share it with a friend. And tune in next time for more financial tips. Thank you, have a great day.