What Is Considered a Reasonable Raise Increase?
By Indeed Editorial Team
Updated May 31, 2022 | Published October 9, 2020
Updated May 31, 2022
Published October 9, 2020
If you had a successful performance review or recently took on additional responsibilities, you may have reason enough to ask for a raise. The exact increase in wages you receive depends on several factors such as your experience level and geographic location. Knowing what's considered a reasonable raise and how to ask for one can increase your chances of receiving a salary increase.
In this article, we define a reasonable raise, list the various factors that determine a raise, explain when it's best to ask for a raise and provide you with the steps to negotiate a salary increase.
What is considered a reasonable raise?
What's considered a reasonable raise typically depends on the perception of the person receiving it. Companies typically offer employees a 3-5% pay increase on average. Even if this range doesn't seem like a reasonable raise to you, keep in mind that consistent wage increases can add up over time, providing you with a higher income than what you received when you started at the company.
It's worth mentioning that while many companies typically offer a monetary raise, they may also offer a non-cash benefit or perk instead of or in addition to your monetary raise. This type of raise isn't factored into the percentage increase you may or may not have received. However, a non-financial reward such as a career development program can help maximize your earning potential in the future.
Why do employees receive raises?
When companies offer their employees raises, they often do so for a specific reason. If you do any of the following things, you're more likely to receive a raise from your employer:
Produce high-quality work
Help drive revenue
Possess unique skills
Have a positive attitude
What factors determine a raise?
Employers take several factors into consideration when deciding whether they want to offer a raise to their employees. Here are some of the factors that determine a raise:
Your job performance
Many employers hold employee performance reviews to assess their strengths and weaknesses and to help their employees improve. They may also conduct reviews to determine whether an employee's performance merits a pay raise. If you perform your job well or exceed expectations, your employer may offer you an increased salary.
The company's geographic location
The average salary bump tends to vary by city and state across the U.S. due to changes in cost of living. For example, while some employees in one area of the country may expect a certain raise, others in a different area may receive a raise that's even higher than the national average due to the higher cost of living in their city. If the cost of living in your area increased in the past year, your employer may decide to offer you a raise.
Industries with faster growth often offer higher raises to not only attract employees, but also to retain their current employees to assist with this growth. For the most part, companies with greater growth have a steady stream of income, allowing them to offer higher compensation to their employees. Industries with slow growth, in contrast, are less likely to offer salary increases.
The job market
If your employer recognizes that you have an occupation that's unique in the job market, they may find it beneficial to offer you a raise. In other words, if there's a shortage of employees or a lack of well-trained or skilled employees, they're more likely to offer a raise to those in the roles they need filled.
Your company's success and regulations highly impact your likelihood of a raise and the amount of raise you receive. In some cases, your employer may not be able to afford giving you a raise or may not offer you a raise if you already meet the pre-determined range they have in place for salary increases. When your company is successful, however, it's more likely to offer you a raise.
Many employers base raises on the amount of responsibilities you've taken on. If you have new responsibilities you were either given or asked for, it's a testament to your work ethic and your ability to be a team player. Your ability to add new responsibilities to your workload may be reason enough for an employer to increase your wages.
Your future at the company
When employers give you a raise, they're investing in your future. Because of this, your future with the company may play a significant role when it comes to your raise. For example, an employer may consider what your responsibilities may look like in the future and whether they'd like you to stay with the company for a significant amount of time. If they foresee a future with you, they're more likely to not only offer you a raise, but offer you a substantial increase in wages.
When to ask for a raise
When you want a raise, it's important to ask at the right time. Timing your request can significantly impact whether you receive an increased salary. Here is when you should consider asking for a raise:
After the six-month mark: It's best to wait until you've worked at your current company for at least six months before asking for a raise. Waiting this amount of time allows you to show your valuable contributions and the overall asset you are to the company.
When your company experiences success: You're more likely to receive a raise when your company is making a profit. This is because an increase in its revenue gives them more money to distribute to its employees. If a major deal or project falls through, for example, it's not the most opportune time to ask for an increased salary as the company will likely look for ways to cut costs.
After completing an important project: If you just completed an important project that successfully shows your contribution to the company, it's a great time to ask your manager for a raise. Asking during this timeframe gives your manager a recent example of the value you add to the company and shows your hard work and work ethic.
Before salary reviews: Ask your manager or the human resources manager when the company reviews compensation. Then, ask for a raise prior to this period. If your company offers raises at the end of May, for example, ask for a raise a few months in advance. This allows your manager to review your request and meet with the relevant parties who determine who gets a raise and, specifically, how much of a raise they receive. If you missed this timeframe, asking your manager for a raise still puts you on their radar.
During annual performance reviews: When you and your manager meet for a performance review, it gives you the opportunity to discuss your pay. Not only is it timely, but speaking about your salary during this time is often expected.
When your manager is happy: Opt to ask for your manager for a raise when they're in a good mood. If you ask during a stressful time, they'll likely have less time and patience to discuss a raise. Wait until things have calmed down before asking for a raise.
How to negotiate a raise
Though it's reasonable to ask for a raise that reflects your work ethic, it's important to follow certain approaches and best practices as it can result in a better outcome. When you ask for a raise, you need to understand why you deserve a raise and how to properly negotiate one. Use these steps to help you negotiate a raise:
1. Consider why you deserve a raise
Before you start negotiations, consider the reason for your request. Look at your recent projects and assignments, moments when you exceeded expectations and any time that you added value to your company. Reflecting on this can help you use specific examples during your discussions with your manager.
2. Establish your target salary
Just as you should research average salaries in your profession before accepting a new position, it's also important to do your research regarding pay raises in your industry and occupation. Proper research lets you know if you're getting paid fairly and helps you decide on a concrete figure to present to your manager when you negotiate your salary.
Make sure to research the average salary for people in your position and industry with the same level of experience. Then, come up with a figure to give your manager when they ask. Typically, it's appropriate to ask for a raise of 10-20% more than what you're currently making. You can also use various online websites that take into account your job title, geographic location and experience level when determining a reasonable raise.
3. Prepare a presentation
Consider what you want to say to your manager when you ask for a raise. Have a convincing narrative that highlights your specific accomplishments in the workplace. Make sure that it's organized and serves as a sales pitch. Keep your presentation conversational and prepare for questions or counterarguments.
4. Schedule a meeting with your manager
When it comes to asking for a raise, it's important to find the right time to start negotiations. Keep in mind certain factors such as how long you've been at the company and the company's current success. Asking during an appropriate time can help you better negotiate a raise.
Related: How to Negotiate a Raise in 7 Steps
Tips for negotiating or asking for a raise
If you need additional help when asking for a raise or negotiating a higher offer, consider the following tips:
Improve your skills. Look for ways you can add value to your company and, specifically, your department. Having a skill that no one else in your company has can help you use your unique abilities as leverage. When your manager notices everyone going to you for help with a particular topic or issue, it may give them enough of a reason to increase your income.
Increase your visibility. As an employee, it's important to exceed expectations and get involved. Volunteer for projects outside of your regular responsibilities. Effectively marketing yourself can help you get noticed by your employer and increase your chances of getting a raise.
Be realistic. As with all negotiations, it's important to set realistic expectations. If you're offered a 3% raise for example, it's unreasonable to ask for an 8% raise. Make sure the raise you ask for aligns with your experience, location and other determining factors.
Be professional. Focus on your own achievements, skills and expertise when negotiating a higher compensation. If you overhear that a co-worker received a higher raise, don't mention this to your employer to negotiate a higher raise for yourself. You should also avoid threatening to leave the company if you don't receive the raise you want.
Consider changing jobs. If negotiations stall and you're still underwhelmed with their offer or you feel like you're worth more than what you're making compared to your research, consider other employment opportunities. Many people change jobs to receive better pay. If you stay at the same company, it may place a limit on the raises you receive if the company is working with a narrow percentage range within which it can increase your pay. When you switch employers, you don't have these restrictions—at least to begin with.
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