With a rising cost of living and wages that aren’t keeping up, people are using a labour shortage to help make their case for inflation pay rises.
“It’s basically asking for a pay rise based purely on the fact that the cost of living has increased,” explained recruitment specialist and author Roxanne Calder.
“You’ll always have inflation, but what we’ve gone through in the past two to three years is quite extraordinary.
“In the first instance, when the pandemic started, real wages fell an average of 2.1 per cent. Then the consumer price index increased by 6.1 per cent. Since then, wages increases are sitting at around 2.4 per cent.
“That 6.1 per cent is a significant increase, so everyone is starting to feel the pressure.”
To put those numbers into the real world, Ms Calder explained that for people sitting on a base salary of $75,000 who haven’t had an increase in the past couple of years, “that 6.1 per cent has potentially impacted your salary by around $75 to $80 a week”.
That’s $3900 to $4160 per year that is missing from your bank account.
“In ‘normal times’ there’s an argument that a pay rise shouldn’t be based on inflation, but purely on a contribution you’re bringing to a business,” said Ms Calder.
“But that is for when you don’t have inflation sitting at 6.1, and when you don’t have unemployment rates sitting so slow.”
Is it a good time to ask?
Despite wages being worth quite a bit less than they were before this latest inflation, you might still be wondering if it’s a good time to ask. Ms Calder says it all depends on how you approach it.
“In one argument, there’s never been a better time to ask for that increase,” she explained, “the other side of the coin is that just like we’re all experiencing cost of living pressures, so are businesses.
“So if you are asking for a pay rise, like everything else it’s a negotiation and it’s about how you handle it. Because the other piece that comes into that equation is the talk of a recession sitting just around the corner.
“It’s a matter of asking for it the right way and being prepared.”
What’s a fair amount to ask for?
You might be tempted to jump right in and ask for a 6.1 per cent, but Ms Calder says you should be more realistic and prepared than that.
“Think big picture, not knee jerk. Consider what happened to you during the pandemic: did you keep my job the whole time? Did you actually get an increase or bonuses at some stage? There’s been an overall wage increase of 2.4 per cent, so if you’ve had some form of an increase already, factor that into the equation.”
She suggests that if you’re asking for a pay rise that is also based on the usual merits, then your number may be different, but in general a fair inflation pay rise would be “somewhere around that four to five per cent mark”.
She said that’s a good number that would not seem out of touch to ask for, and would sit well with most employers, no matter the outcome of your negotiations.
Don’t make it personal
According to Ms Calder, mentioning the increase in cost of living won’t help your case, but narrowing down your argument specifically to how your wage is affected can work wonders.
“Talk about it in terms that are less personal,” she recommends. “Something like ‘I’ve not had an increase for two years, inflation is sitting at 6.1 per cent, which means that I’m now out of pocket by X amount of dollars’ — whatever that might be.”
She also says you should research where your job sits in the market, and whether your wage is on par.
Check your contract
Two of the most important things to check before asking for an inflation pay rise are your original job description and your contract.
“Lots of people get a job description when they first start a contract, and most people file that away and forget about it,” explains Ms Calder.
“But that job description is that it’s the essence of what you’re meant to be doing. I can promise you, your boss or HR will be looking at this job description when you ask. They’re going to go ‘OK, let’s just tick off the boxes — are you fulfilling the basic requirements that we employed you for in the first place?’
“You want to be totally across that so you can show you are doing it, and doing it better than you were. Or maybe there’s a part of it that you’re not doing, but there’s a reason for it. So you want to be prepared to have that conversation.”
You’ll want to be aware of rules around negotiating salary in the contract you signed as well, because some won’t allow individual pay discussions.
“If you’re on an enterprise agreements, or an award, then it’ll be difficult for you to negotiate individually,” said Ms Calder.
“However, if you still believe it’s warranted, have the conversation anyway. For one, it’s really empowering and will help you not harbour resentment.
“It’s also really great for your boss to be aware — especially if it’s a nice conversation that isn’t argumentative or defensive. Potentially there are other ways they can help look after you.”
Practice your script
Asking for a pay rise is a very uncommon experience for most of us, so Ms Calder suggests writing out your script and practising before you get into the meeting.
“You want to win this sort of conversation, or have a really good outcome,” she said. “Write it down and practice saying it — delivery is key.
“You might have the intent that you love your job and you don’t want to leave it over this, so you want to come out and express that in the right way instead of being defensive or argumentative because you’re nervous.
“It’s a negotiation at the end of the day, which is a skill everyone should really require.”