How much a pay rise is worth
What you can do with a pay rise
How to negotiate salary at an interview
How to negotiate with your employer
How to assess your self-worth
Knowing how to negotiate your salary is an essential component of career success. At some point, almost everyone will need to negotiate their salary, either in their current job or at the interview for their next position. Why, then, do so many people find this process so difficult?
We’ll teach you how to never be afraid of asking for a pay rise again.
How much is a pay rise worth?
A pay rise can be one of the most significant financial changes to a person’s life, and the benefits go far beyond the dollar value of a higher salary. A pay rise can be life-changing well before you consider major purchases, particularly in reducing the gap between minimum wage and the national average.
Following the latest review by the Australian Fair Work Ombudsman, the national minimum wage in Australia is $19.84 per hour, or $753.80 per week. Now compare this with the latest data from the Australian Bureau of Statistics, which reveals average weekly earnings for Australians:
- The full-time average salary is more than $85,000 per year
- The average salary for all employees is just over $65,000 per year
- The estimated minimum salary in Australia is $39,197.60
Average Weekly Salary in Australia
|Employment type||Average weekly earnings|
|Full-time adult ordinary||$1,658.70|
|Full-time adult total||$1,720.90|
|All employees total||$1,256.20|
These figures show that the average salary for a full-time adult is more than double the national minimum wage - and just short of the Organisation for Economic Co-operation and Development (OECD) recommendation for a living wage ($41,184) which the Australian Council of Trade Unions (ACTU) advocate for.
The fastest way to get more money is to get a pay rise and increase your salary.
Minimum wage vs Average wage
While it is possible to live in Australia on $550-670 a week using an Emergency Budgeting Guide, closing the gap between minimum wage and the average wage can bring numerous benefits, and learning to negotiate your salary is the fastest way to achieve that goal:
- You can repay debts
- You can save more money
- You can improve your quality of life
Saving money and repaying debt are major financial priorities for Australians. In research published by Australian Bank, ING, a survey of working Australians found 61% have debt other than a home loan. It also revealed:
- 44% of millennials are unsure of their total debt
- 65% use budgeting to manage debts
- 33% gamble to manage their debts
- 19% borrow money from their family to manage debt
- 28% are living from one payday to the next
- 25% of all working Australians and 51% of millennials ignore their debt
- Saving more money (83%), improved finances (46%) and repaying debt (31%) were the top New Year resolutions
A pay rise will also benefit your long-term savings by increasing superannuation contributions made by your employer. The sooner you secure a pay rise, the greater your retirement fund will be.
You can use the salary calculator to see how much a pay rise would be worth to you.
What you can do with a pay rise
Getting a pay rise is an instant way to boost your retirement fund, but what benefits are available from an early pay rise if you choose to invest the money and grow your savings through compound interest?
Below, we’ll look at three case studies which illustrate the value of learning to negotiate as early as possible in your career.
Case Study - Dave
- Dave is 25 and paid $48,000 and gets a $2,000 pay rise.
- His take-home pay increases by $38.46 per week / $166.66 per month
- He deposits $150 each month into a savings account with a 5% interest rate
- He saves the money until he is 55
- After 30 years, his savings are worth $655,147
Case Study - Anna
- Anna is 30 and paid $70,000 and gets a $5,000 pay rise
- Her take-home pay increases by $96.16 per week / $416.69 per month
- She deposits $300 each month into a savings account with a 5% interest rate
- She saves the money until she is 55
- After 25 years, her savings are worth $709,477
Case Study - Grace
- Grace is 35 and paid $90,000 and gets a $10,000 pay rise
- Her take-home pay increases by $192.31 per week / $833.34 per month
- She deposits $600 each month into a savings account with a 5% interest rate
- She saves the money until she is 55
- After 20 years, her savings are worth $685,177
Although Grace deposits four times the amount Dave does, her final savings are only marginally higher, and lower than Anna’s savings who only deposited half the regular amount.
This is the power of compound interest, and a great example of why investing early can bring long-term financial freedom. You can use the compound interest calculator to estimate interest earned on savings.
Learn more about how to grow your deposits using a high-interest savings account.
Top 10 Salary Negotiating Tips
- Know your self-worth
- Know your role
- Prepare a strategy roadmap
- Be polite
- Listen to the other person
- Keep your options open
- Focus on the important things
- Avoid making a ‘final offer’
- Learn from your mistakes
Top 10 Salary Negotiating Mistakes
- Not preparing
- Revealing your previous salary
- Failing to compromise
- Asking closed questions
- Focussing on one thing
- Working against your employer
- Mistaking arrogance for confidence
- Being rude
- Making the negotiation personal
Negotiating salary at an interview
The thought of negotiating salary during a job interview is enough to make many people anxious, but few people may realise how vital a starting salary will be to their future. Your starting salary is important for a few reasons:
- It affects your take-home pay
- It affects your superannuation contributions
- It can affect how much you receive in a pay rise
- It can affect your starting salary in future roles
Most people will have been on the receiving end of the last point, framed as a question during an interview: What was your salary in your previous role?
Employers ask this question during an interview for two reasons:
- To make you believe your current value is tied to your previous salary
- To offer a slightly higher salary as an incentive
It’s an easy trap to fall into, and the promise of a slightly higher salary can be tempting for many potential employees - but is it fair?
No, and you should not expect it to be.
Employers spend countless hours engaged with their business, planning, strategising, negotiating, and finding the best value they can - your job interview is no different.
They know their business inside and out, how it operates, and how it makes money; the only thing they don’t know about their business is what you can bring to it.
Before your interview
- Update your CV
Many employers and recruiters will keep CVs on file if they aren’t suitable for a particular role. Review your CV before a job interview to ensure you are presenting the most up-to-date reflection of your skills and experience.
- Research the company
Know who you are negotiating with. Understanding the business’s direction and history will give insight into how the business operates - if it has seen considerable recent success, the chances of successfully negotiating your salary will be higher.
- Research comparative roles
The value of certain roles and skill sets to businesses are often changing. Research similar roles and assess what each candidate is bringing to the table - this can identify areas you can improve on, aspects of your value which are above-average, and when a role is underpaid for the requirements asked.
- Research comparative salaries
Research up-to-date salaries to give yourself an idea of where to work from in negotiation. Avoid comparing your salary with your friends - try and focus on directly similar roles in similar companies. You can use salary comparison websites to find details on salaries and role descriptions.
- Prepare a strategy roadmap for your role
Entering an interview with a strategy for your role is one of the best - and most overlooked - strategies for negotiating a higher starting salary. Your plan should breakdown the requirements of the role as listed in the job description, and illustrate how you will use your relative skills to reach goals in the position.
- Prepare questions for the interview
The questions you prepare for your interview are just as important as the strategy for your role. Only ask questions relevant to your role and the company, and ask the questions you want answers to - don’t simply ask the questions you think they want you to ask.
Arrange multiple interviews when looking for a job. Negotiating your starting salary when you already have an offer can provide leverage or a safety net if you are unable to reach a mutual agreement.
During your interview
Smiling can be one of the fastest and easiest ways to convey positivity and confidence. In an interview, this is often your first chance to make an opening impression, and conveys to your interviewer that you are excited about the opportunity while removing any initial tension.
- Be clear on your plans
Transparency is key in a job interview. If you’re negotiating with a prospective employer, let them know you’re serious about taking the position, and avoid using the opportunity to simply leverage a competitive offer.
- Justify your request
Use the strategic plan for your role to illustrate how you will perform in the position, and use the information gathered on comparative roles and salaries to highlight the aspects of your experience and skill set which justify your reasons for a higher starting salary.
The interviewer is not your enemy. Remember, you’ll be working with this person, and potentially negotiating with them again for a future pay rise. Display your ability to collaborate and find a mutual solution - you should be eager to reach an agreement which is mutually beneficial.
- Consider more than your salary
Salary is only one part of the compensation puzzle, and your interview negotiation should look at the total benefits on offer by your employer, including:
- Company shares
- Flexible working hours
- Training and development
- Job title
Considering the total package offered by a role provides greater flexibility in how you negotiate a mutually beneficial agreement.
If all else fails, compromise. Discuss your progression in the role and the criteria for a future pay rise, then agree to put the conditions in writing within your contract and set a date to review your salary.
Negotiating salary with your employer
Negotiating your salary with an employer will be a common situation throughout your career. Often, you’ll want to negotiate pay for a few main reasons:
- You have spent significant time in a role
- Your level of expertise has increased
- You are changing role or wanting a promotion
- You are changing your working hours
The most important aspect of your preparation will be tracking your performance as an employee. In every role, you should aim to begin tracking your performance as early as possible, to monitor:
- Changes to your workload
- Changes to your role and responsibilities
- The quantity of work you perform
- The value your work brings to the business
Where possible, keep up to three months of performance data. This length of time will allow you to illustrate where you have made improvements, and show consistency in your ability to perform and deliver value to your employer.
Track your performance as soon as you can. The increase of workload for new employees will be greatest in the first few months of a role, and the longer you are able to track your performance, the greater the advantage you will have when negotiating your pay rise.
Before your meeting
- Research comparative roles and salaries
Just as you would research relative roles and salaries when negotiating in a job interview, gather as much information as possible before your pay review. Spending even six months in a role can significantly change your duties, responsibilities, and level of expertise - ensure you have up-to-date figures that accurately reflect your position.
- Track your performance for as long as possible
Tracking your performance is an invaluable tool when negotiating your pay. If you started your role with a strategic road map, you’ll be able to see how you achieved those goals and show consistency in your performance. It also allows you to make future projections - three months of tracking history will help your employer see the value you can offer in the following quarter.
- Identify the value you bring to the business through your performance
One crucial aspect of your performance tracking is to equate the amount of work you produce with the value it brings the business. Find direct correlations between your actions and your success - don’t exaggerate or inflate the reasons behind your value - and show how what you bring to the business has improved alongside your performance.
- Prepare a list of discussion points
If it’s your first time negotiating salary with a new employer, a list of discussion points is vital. This is your opportunity to find out what your employer is looking for in relation to performance, and what they can offer you in addition to salary to help improve your performance and contribution to the business.
Focus on your contribution to the company, and avoid comparing your performance to other employees. Review the work you have done in your role and the results you have achieved for the business in a quantifiable way.
During your meeting
- Keep it professional
One of the fastest ways to sour negotiations is by making the conversation personal. Your employer is not your enemy; they want the best outcome for their company. Focus on the value you deliver as an employee and not what you feel you are missing out on.
- Justify your request
This is your opportunity to use all of your well-researched performance-tracking. Stay calm and work through each point without rushing. You want to allow your employer the time to consider the information you are presenting them, without overwhelming them with too many figures.
- Consider more than your salary
Just as when negotiating during an interview, consider the total compensation for your employment in a role and think of each as a point to cover:
- Company shares
- Flexible working hours
- Training and development
If you can’t achieve your goal for a pay rise, begin working through your list:
- Can you agree on targets for lump-sum bonuses?
- Can the business offer shares in lieu of a pay rise?
- Can you work flexible hours, or reduce your working hours?
- Can your employer pay for any ongoing training and development courses?
Your goal here isn’t just to get more money, it’s to ensure your total compensation accurately reflects the value you deliver to the business.
- Listen and learn
In some situations, there’s simply no way to achieve your goal of a pay rise. However, you should always leave a pay review with one very clear piece of information:
You know what you need to do to receive a pay rise from your employer.
The reason for this is simple - you know the information you will need next time to secure a pay rise, and you’ll know if it’s a more realistic option to look for other employment where you can be fairly compensated.
Stay in your meeting until you achieve a positive solution. Understand your employer’s expectations for agreeing to a pay rise and you’ll be better prepared for your next review.
Self-worth: Salary vs Psychology
For many people, getting a pay rise has more to do with psychology than strong negotiating skills. Psychology in negotiation happens before you enter the room - it’s not a way to manipulate others, but a strategy used to assess your value and self-worth, and confidently project this in every moment of your working life.
What is your value?
Your value as a person is what you can offer other people. As individuals, the value we offer those around us can be quantified in many different ways:
We can easily show value as individuals, but how do we demonstrate value as employees?
For the majority of roles, employees can generally offer value in five ways:
- Skill set - Perform the functions of a role
- Work experience - Plan, strategise, adapt and innovate
- Work ethic - Loyalty, dedication, and professionalism
- Compatibility - Alignment with the business and shareholders
- Sociability - Personal manner, appearance, behaviour
This is an important point to understand when assessing your value as an employee. Too often, employees will imbalance their self-worth by focussing on the primary way they offer value. For example:
- Adam is earning a $50,000 salary working with a company for six months
- He is in a junior role and works overtime to show his commitment
- The quantity of his work is excellent
- The quality of his work is average
- He asks for a $5,000 pay rise and focuses on his overtime commitment to the company
- Adam’s employer focuses on the quality of his work and not his voluntary overtime
- Adam feels frustrated and leaves the meeting with a lower perceived self-worth
What went wrong?
Adam framed his self-worth by focussing solely on what he felt was valuable (work ethic) instead of understanding what his employer values (skill set and work ethic).
What could have happened?
If Adam had considered his total value as an employee, his request for a pay rise may have ended differently. Instead of focussing on the hours he has worked, Adam could have focussed on the amount of work he has produced.
He listens to his employer, who comments on the quality of his work and says it needs to improve before he can receive a pay rise.
With an accurate assessment of his abilities and value as an employee, Adam negotiates a compromise. In lieu of a pay rise, his employer agrees to:
- Pay for a 12-week training course ($2,500) in the evenings
- Re-assess Adam’s salary in three months’ time
While both of these scenarios ended without Adam receiving a direct pay rise, the second example is far more beneficial:
- Adam understands his employer’s requirements for a pay rise
- Adam is improving his skill set
- Adam is still showing the same work ethic toward his role
- Adam’s ability to listen and negotiate improved his compatibility with the company
- Adam leaves the meeting with a positive attitude, which enhances his sociability
The lesson here is simple:
Understanding what your employer can offer is just as vital as assessing your own value.
Why do we attach our self-worth to our salary?
The origins of business are pretty simple:
- Person A has something that Person B wants
- Person B has something that Person A wants
- Person A and Person B agree the items are of equal value and trade.
This is the basic template for all business in our modern world, so let’s look at it in modern employment terms:
- Person A has a skill set that Person B wants
- Person B has a salary and job position that Person A wants
- Person A and Person B agree on the value of each and enter a contractual arrangement.
These two examples are almost identical, so why do many people feel they are vastly different?
The answer is simple: We believe that in the first example, both Person A and Person B only know the value of their own items. In the second example, we believe that Person A and Person B must independently know the value of both items.
As an employee, job interviewee, or self-employed freelancer, this is one of the first (and easiest) places to slip up when negotiating your salary:
You believe your employer is better at assessing your value than you are.
If you cannot break free from this mindset, you will always struggle to negotiate before you have even started. Now let’s look at the second example again, but this time, imagine both Person A and Person B only know the value of what they are offering:
- How do they reach an agreement? They negotiate.
- How do they negotiate? By demonstrating the value of what they can offer.
How can you adopt this mindset and succeed in conquering your next salary review or job interview? By learning to assess your self-worth, and by breaking free from negative thinking.
How to break free from negative thinking
Negative thinking is a type of thought-pattern where an individual will only focus on the worst-case result for any given situation. When applied to ourselves, negative thinking can distort our sense of self-worth and our perception of those around us:
- We feel unworthy of attention or kindness
- We feel others are praised unfairly
- We create problems to justify our feelings
- We lose our sense of purpose and confidence
In a job interview or pay review, negative thinking removes your ability to negotiate.
Negative thinking can be difficult to identify in ourselves, particularly as our skill set and value improve. The Dunning-Kruger effect is a psychological cognitive bias described by social psychologists David Dunning and Justin Kruger following their 1999 study. It proposes that:
- People with low ability at a task overestimate their ability
- People with high ability at a task underestimate their ability
- Bias occurs from an internal illusion and an external misconception
This bias can often occur in the workplace due to how we mentally approach challenges. For example:
- Emily and Sarah are in employed in identical roles
- Emily has low ability and struggles with each task
- Sarah has high ability and easily completes each task
- Emily thinks Sarah must have an easy workload
- Sarah thinks Emily must have a difficult workload
Both employees are allowing negative thinking to influence their self-worth:
- Emily feels underpaid
- Sarah feels undeserving of a pay rise
Using what we’ve learned in this guide, it’s likely that in this scenario:
- Emily is more likely to ask for a pay rise and less likely to receive one
- Sarah is less likely to ask for a pay rise and more likely to receive one
In both cases, the employee is allowing negative thinking to influence their self-worth, instead of assessing their value based on what they can offer the business.
By breaking free of this mindset, Emily may ask how to improve her performance, and Sarah may feel ready to transition to a leadership role - each using their individual value to improve their sense of self-worth, while subsequently improving their contribution to the business.
The benefits of confidence and positive thinking
- Your performance improves. Confidence allows us to perform at our best, and consistently perform well under pressure. Increased confidence will help you approach challenges and difficult tasks proactively.
- Your influence improves. Confidence can be infectious, and your belief in yourself inspires those around you. Greater confidence can boost performance in sales-oriented roles, and improve staff social engagement.
- You show potential for leadership. Great leaders inspire confidence in all that follow them. The best leaders are not only confident in their own abilities, but able to identify value and abilities in others, and teach them to champion their own confidence.
- Your sense of purpose improves. Believing in yourself and your ability allows you to approach tasks with a sense of accomplishment. Properly applying your skills to challenges in your role can result in a strong sense of purpose.
- Your ability to plan improves. Positive thinking brings a solution to every problem. A confident employee has a deep understanding of their abilities and how to use them, thinking outside the box and seeing the potential for everything.
- Your anxiety improves. Positive thinking and confidence are the greatest enemies of anxiety, stress, and fear - three emotional states which can be physically harmful, and prevent you from achieving your career goals.
- Your energy improves. Motivation and energy both have links to confidence and a positive mindset, which can help achieve a sense of purpose and better, consistent sleep patterns.
- Your happiness improves. Happiness is unique to all us, but confidence and positive thinking are the foundations for enjoying all that life has to offer - including your next job interview or salary review.
A pay rise is the fastest way to get more money. Learning to negotiate your salary at a job interview, and to negotiate a pay rise with your employer, are two crucial tools you can use to earn more money, and improve your future savings.
The sooner you learn how to get a pay rise, the more you can save throughout your life.
Salary Negotiation FAQ
What is the fastest way to earn more money?
The fastest way to earn more money is to negotiate a pay rise and increase your salary, and one of the most reliable ways to increase your long-term savings is to get a pay rise as soon as you can in your career.
What is the average salary in Australia?
The average full-time salary in Australia is $86,252.40 before tax. The average salary for all Australian employees is $65,322.40 before tax.
What is the minimum wage in Australia?
The national minimum wage in Australia is $19.84 per hour or $753.80 per week. This equates to a minimum salary in Australia of $39,197.60.
What is the living wage in Australia?
The recommended living wage in Australia is $41,184 per year before tax. This is based on a formula used by the Organisation for Economic Co-operation and Development and is the living wage advocated for by the Australian Council of Trade Unions.
When should I ask for a pay rise?
Ask for a pay rise as soon as you can justify receiving one. You can even negotiate your pay during a job interview - before you’ve even started the role. The sooner you ask for a pay rise, the better you will understand your employer’s criteria for agreeing to one.