I am frequently asked, “How do I ask my boss for a raise?” In order to successfully negotiate your salary, either when interviewing or in your current job, you need to understand how salaries are decided.

The Job Determines the Salary
Salaries go hand-in-hand with the job function. Companies regularly review survey data to see what competitors pay for certain positions. A company may choose pay slightly higher or lower than the “median” or middle-point salary for different positions. The salary also depends on the benefit package offered and how difficult it is to fill a particular job. If a company pays too low, employees would constantly leave for better opportunities. If a company pays too high, it would have many applicants, but waste money that could be invested elsewhere in the business. Whether you like the salary or not, chances are it is in the market range, especially if the company is recruits outside and competes for new talent.

Experience Can Impact Salary
Most jobs have salary “ranges” and the more experienced you are, the higher your salary range will be. However, your experience needs to be relevant to the position. Even if you are older and had a successful career in another field, you may not be given credit for all your prior work if the boss feels those skills will not be valuable in the new job.

Raises Occur Once a Year
People often think they deserve a raise because they are doing a good job. Unfortunately that is not always the way it works. Companies operate on budgets, and once a year, management sets a target salary budget for the entire company. This number is generally in line with inflation or the average salary increase for the industry, but if the company is facing difficult times, salary increases can be zero. Each department manager has a “pool” for salary increases. If the manager thinks everyone is doing equally well, every person might get the same increase, such as 4 percent. If some people are performing better or worse, their raises could be above or below 4 percent, but the department total will not be more than the budgeted amount. While you may think you have earned a 15 percent to 20 percent raise, it is a zero-sum game and a number of people would need to perform poorly for you to get such an increase.

Look For A Promotion To Get A Raise
The way to get a large raise is to either get increased responsibilities in your current role that jump you into a different pay grade or be promoted to a new and higher-graded role. Hopefully, there are opportunities at your existing company but if not you may need to leave. A promotion is usually the one time you will get a raise out-of-cycle. If you are promoted, be sure to understand what the salary will be and when you will be eligible for another increase. Often if someone is promoted mid-year he or she must wait more than a year to get another raise to get back on the normal cycle. The only time other than a promotion when salaries may be adjusted is if management realizes that “compression” is occurring. This happens when loyal employees, who received annual raises, have fallen significantly behind the industry norm for their jobs. This is most evident when new employees must be paid close to the pay of their bosses or employees with much more experience in the job. When compression occurs, a good company will adjust all the salaries. If your salary falls way behind what you are worth at another company, you may need to leave to get your true value. Nevertheless, first try to point out the inequity to your boss and see if you can get a raise.

When To Negotiate
You have the most leverage to negotiate your salary before you join a company. However, for many entry-level jobs there is one set salary, especially if a large number of people are being hired at the same time. If you are told these salaries are fixed, do not create ill will by trying to negotiate. For more senior jobs the salary may be more negotiable, depending on how much the company wants to hire you. When interviewing, you can tell a potential employer what your salary expectations are, if asked, but do not negotiate until an offer is made. You want the company emotionally committed to you before you start haggling over money. If you do not like the starting salary, consider negotiating a six-month review where you have the opportunity to get a mid-year raise if your performance is good. Be sure to get this in writing.

While money is important, surveys show that it is fourth or fifth on the list of important factors in determining job satisfaction. You may be willing to trade a little salary for other benefits or to work at a challenging job with people you respect. The choice is yours.

· Takeaways
o Focus on the salary you receive when hired. Once employed, raises generally will be in line with the company average.
o To get a large raise you usually need a promotion – either inside or outside the company.
o Don’t expect a raise more than once a year.
o Salary is just one part of an equation that includes job satisfaction and company environment. You need to find the right balance for you.