Wages grew at a record annual pace between April and June, rising by 7.8 per cent, the highest annual growth rate since comparable records began in 2001.
The data, from the Office of National Statistics (ONS), has fuelled expectation that the Bank of England will be forced to raise interest rates again to calm inflation.
Inflation, which measures how quickly the price of goods is increasing, peaked at 11.1 per cent in October 2022, but has fallen since. The most current reading, for June, showed it had fallen to 7.9 per cent. However, that is still much higher than the Bank’s 2 per cent target.
Laura Suter, head of personal finance at investment platform AJ Bell, warned that every drop in rate of inflation means employees have less capacity to negotiate, as firms have more justification to low-ball their offers.
“Employees wanting to negotiate their salary should get their skates on before inflation falls further,” she adds.
It is worth bearing in mind that many organisations will be resistant to giving out a bumper pay deal as their own costs rise, as exemplified in the number of strikes taking place across the country in 2023.
Below, experts reveal how to negotiate a higher pay packet.
How to negotiate higher pay
First, establish how your firm handles pay rises. “While many companies have transparent systems for awarding pay rises that can involve a comprehensive performance review, others award salary increases on an ad hoc basis,” says Alice Haine, personal finance analyst at Bestinvest.
“If there is no clear pay review structure, it might be wise to state your case now, particularly if you feel you deserve a bump up or haven’t received an uplift during the cost-of-living crisis.”
After that, it’s a matter of being “armed with the right information and arguments to win your boss over”, says Suter. “Simply going in and asking for a raise because your costs have risen won’t cut it. You need solid arguments and evidence,” she adds.
A good first step is to research similar roles elsewhere – websites such as Glassdoor are useful here – to see how much your salary could be if you moved to a competitor. That will give your employer a firm idea of exactly what it could cost to lose you, plus the expense of recruiting. Being aware of any existing pay banding or grading in your firm is useful, too – that will ultimately determine how far up or down the pay scale you can go.
Other information it is good to have includes whether you have taken on more responsibilities or longer hours, gained new qualifications, or taken a more active role in supporting or leading your colleagues, says Haine. Being able to point to a strong performance record is also important, as it is to highlight any times you have explicitly made more money for your employer.
But it might be best not to mention inflation at all, advises Michael Smets, professor of management at the University of Oxford’s Saïd Business School. “Employers don’t pay for your living expenses, but for the value you create for the company,” he explains. “So always use company value, rather than personal cost, as an argument for a pay rise.”
You should also be wary of mentioning your broad skills or technical expertise, Professor Smets adds. “Skills are traded globally and employers might get the same value elsewhere at a cheaper cost,” he warns.
“By contrast, employees underestimate the value they create by connecting the dots, orchestrating more complex solutions, and producing something others cannot easily copy. So when you go into your salary negotiation, don’t enter as expert – enter as orchestrator.”
Then it’s a case of asking the powers that be for a meeting. Scheduling a proper time to talk is important, even in a small firm, as it will mean nobody is caught off guard – and reduce the chances that they say no, says Ms Suter. Highlighting what you want to talk about, and even outlining a few discussion points in advance, can be helpful, too.
Both Ms Suter and Ms Haine advise practising what you are going to say in advance – with a friend, partner or even pet – and have an ideal figure in mind that you would be happy with.
In the moment, it’s important to be open to negotiation. “You might not get the full amount you want but a compromise might include accepting other benefits the company could offer, such as extra holiday, more work-from-home flexibility or additional training,” says Haine.
Whatever the outcome is, get the decision in writing to ensure you can make it happen. And if you’re not happy, you can remind your company that other positions elsewhere will be paying what you want.
In the end, with the job market being as tight as it is and inflation high for the time being, employees have a strong negotiating position – don’t let your bosses forget it.
