The end of the calendar year is a time for tactfully exiting holiday parties and hazarding guesses at what to get your coworker for Secret Santa, but more importantly, for many workplaces, it’s also the time when performance reviews happen, budgets are made, and salaries are negotiated.
The most recent Consumer Price Index (CPI) inflation report showed that the annual rate of inflation in the United States reached 6.2% in October, the highest it has been in more than 30 years. With prices rising across the board, an increase in pay should be a given — after all, failing to increase salaries based on inflation is effectively the same effect as cutting your wages.
So if you’re planning to ask for a raise, how should you incorporate the state of inflation into your conversation? Monica Torres writes for HuffPost that it isn’t always a good idea to directly reference inflation during your negotiation. Before you invoke record-setting inflation rates as a part of advocating for yourself, here’s what you should know.
Why now is the right time to ask for a raise
With inflation raising costs all around you, and with a tight labour market giving you the upper hand, why shouldn’t your pay increase accordingly? It’s no secret that many employers aren’t likely to give you a raise unless you ask. And with the new year fast-approaching, now is the time to have that pay raise conversation.
Given these circumstances, we’ve previously covered that a cost-of-living raise is an easier lift than, say, seeking a promotion (which is the more sure-fire way to significantly boost your income). But what exactly is a cost-of-living raise, and is it an option for you?
What is a cost-of-living raise?
A cost-of-living raise, sometimes called a cost-of-living adjustment (COLA), is a pay raise that correlates to the rise in the cost of living from year to year. According to Indeed, some organisations may incorporate an annual salary adjustment into the compensation plan to account for the yearly rise in the cost of living.
Even if your employer does not offer a COLA officially, a cost-of-living raise is a reasonable request. Here’s Indeed’s guide to calculating your COLA. The average raise used to be around 2-3% to match average inflation, but with consumer prices jumping higher and higher, asking for 5% to cover inflation makes sense. At the same time, bringing up inflation could potentially weaken the case for your raise.
The case against bringing up inflation
If you bring up the bigger economic picture, you risk putting off your employer by your cost-of-living argument. In fact, you risk equipping them with a powerful counterpoint: They might come back at you with the fact that their costs of running a business also went up with inflation. Nadia De Ala, a negotiation coach for professionals in technology, tells HuffPost that your employers’ increased expenses could give them plenty of room to undermine your inflation-based request.
De Ala says that you should still find out how inflation affects your market value, and those numbers should still be a part of your research going into a negotiation. Knowing those numbers, however, is not the same thing as making them central to your raise request. Instead, she says “the biggest point we want your employers to focus on is the value that you bring with your work.” Your strongest weapons are your personal contributions, rather than the state of the economy.
Consider two different conversations
Daniel Space, a human resources consultant with business partners in strategic staffing, told HuffPost that he recommends making a cost-of-living raise request into one conversation, and a raise request due to performance into another.
Think of this like a two-pronged negotiation tactic. First, you frame the cost-of-living raise as more of a matter-of-fact, no-brainer request. For instance, Space says you can approach your boss with a simple question like “Can [inflation] be considered as part of the compensation process?” Then, even if this conversation doesn’t pan out as hoped, you’ve put inflation in a different box than your merit-based request. This way, you can avoid the potential pitfall explained above, in which your employer can dismiss your increased living costs with their own increased operating costs.
Either way, be prepared to explain your value
Asking for a raise comes down to establishing your value. Still, no matter what you bring to the table, your employer might say no for any number of reasons. Now is a prime time to ask for a raise, but you also have to be prepared for disappointment. For more tips on asking for a raise, here’s how to get in the right mindset, and here’s how to prep to the best of your ability.