Inflation is the highest it’s been in 40 years, and it could be affecting your bottom line.
In one study, employers indicated they planned to move forward with an average of 3% salary adjustments for 2022. Though that’s higher than the average of 2.7% increases offered in prior years, 3% raises don’t adequately align with today’s inflation rate of more than 7%, which means employees are earning less money per paycheck.
If you’re unhappy with your salary and your employer isn’t adjusting it with your area’s cost of living parameters, it’s likely time to ask for a COLA raise.
A cost of living raise, also referred to as a cost of living adjustment (COLA), is a pay increase provided to employees to address higher costs associated with the annual cost of living. Some employers incorporate a COLA raise into their overall compensation scheme, while others do not.
Wondering how much is a cost of living raise? Cost of living raises generally keep up with or remain close to inflation rates. According to Money magazine, COLA raises have averaged nearly 2% in recent years. The inflation rates in local markets can be higher or lower than the national average, and it’s often local markets that drive COLA adjustments.
With the current labor shortage and high employee turnover rates, employees have bargaining power. That, coupled with increased inflation, is why you should ask for a COLA raise in 2022.
When wondering how to ask for a raise when you’re underpaid, make a list of reasons behind your request. Some considerations include:
Once you’re confident with the answers to the above, plan how you approach the meeting with your supervisor. Here’s how to make your case.
Go into any meeting about a salary increase equipped with market research. Check out the Bureau of Labor Statistics (BLS), Salary.com, or iHire’s Salary Research Tool to determine the average high, medium, and low salary ranges for your career title in your location. Bringing this information allows you to confidently request the increase you desire without hesitation. It also gives you the ability to justify your increase request with valid data.
If you cite COLA as your chief reason for requesting a raise, your manager might easily counter with the fact that inflation has also impacted the cost of running the business. Therefore, focus on the value you bring to the organization when negotiating any pay increase. Answer these types of questions to build your case on how you add value to the organization:
Refer to previous performance reviews as a starting point when determining how to best respond to the above questions.
Once you’ve built your case, communicate the salary increase you believe is fair. At a minimum, you want a boost that will cover inflation, so 6% to 7% is reasonable for 2022. It’s wise to go in with a number on the high end in case your employer attempts to negotiate down.
Since it’s common for an employer to counter a salary increase request, go into the conversation prepared to negotiate. Be open to hearing your manager out while being clear on the number you’re willing to settle for if a counter occurs. You may also ask your supervisor to provide a breakdown of your total compensation package – your base salary plus the value of your benefits. Even if you don’t receive the pay bump you seek, your employer could make up for shortcomings with other perks, like PTO, a performance bonus, or health insurance.
If the pay raise conversation doesn’t pan out the way you’d hope, then it might be time to assess the pros and cons of staying in your position.
For more advice on negotiating for a fair salary during any stage of your career, visit our Job Seeker Resource Center.