There’s no doubt the cost of living is going up. And even if you earn what looks like a nice salary on paper, it may not go very far if you live in a major metro area.
Fortunately, this may be a good year to increase your paycheck. Recent research by PayScale, a provider of compensation data, found 89% of employers plan to give raises this year. They know that great employees who are underpaid are a flight risk. Sixty-three percent say retention is a key concern—up 125% since the recession in 2009.
But going after a raise alone may not be the best strategy to max out your earnings if your company is now basing more of its compensation packages on performance. The average raise projected for 2015 is just 3%—and in some cities, such a New York, Minneapolis/St. Paul and Milwaukee, pay increases are expected to be lower—just 2.8%, according to the consultancy Aon Hewitt. If you make $200,000, that 3% is $6,000 in pre-tax pay.
Meanwhile, PayScale found that 43% of employers are increasing their budget for bonuses this year. The percentage of employers offering variable pay rose from 78% in 2005 to 91% last year, according to Aon Hewitt.
To maximize your overall pay, you need to get a handle on your company’s compensation practices and then position yourself accordingly. Here’s how.
Scope out the situation. Do some reconnaissance to find out if your company will be raising pay and/or giving bonuses this year. If it is giving raises, find out the criteria from HR or your supervisor. If compensation will remain flat, your only realistic chance of earning what you’re worth soon is getting another job. One of the top two reasons for leaving a company in 2014 was “seeking higher pay elsewhere,” according to PayScale’s research.
Know which projects are bonus-worthy. Some companies give spot bonuses tied to general company goals, while others link them to specific objectives. Find out which efforts your company rewards with bonuses, so you can realistically assess your chances of getting one. WorldatWork, a nonprofit human resources association, found that 90% of companies give spot bonuses for special recognition, 85% link them to “going above and beyond,” and 72% award them for completing a project.
Some bonuses are easier to get than others. Sixty three percent of employers offer referral bonuses, so if you have a few friends who would be a great fit for your company, this may be a low-hanging fruit. The most common referral bonus for finding a nonclerical team member ranges from $1,000 to $2,499, WorldatWork found.
Understand moves with the highest payoff. Generally speaking, the higher your title, the more likely it will be that you can move the needle on your compensation in a big way with a bonus. But it depends on your company. WorldatWork found that for executives, more than half of bonuses top $5,000 but for middle managers, only 31% of bonuses hit that size or more. Most commonly, bonuses for supervisors, professionals, sales and IT staff range from $2,500 to $5,000.
If you’re not part of the executive team, focusing on bonuses may not be the quickest route to meaningfully higher compensation. Your best chance of seeing a real bump in pay is by winning a more senior title that pushes you into a higher salary bracket. That’s hard work, but it also means you’ll have a shot at the best bonuses, too.