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.
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.
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:
|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|
MONEY TIP: The fastest way to get more money is to get a pay rise and increase your salary.
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:
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:
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.
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.
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.
MONEY TIP: Learn more about how to grow your deposits using a high-interest savings account.
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:
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:
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.
MONEY TIP: 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.
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:
Considering the total package offered by a role provides greater flexibility in how you negotiate a mutually beneficial agreement.
MONEY TIP: 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 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:
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:
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.
MONEY TIP: 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.
MONEY TIP: 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.
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:
If you can’t achieve your goal for a pay rise, begin working through your list:
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.
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.
MONEY TIP: 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.
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.
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:
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:
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:
While both of these scenarios ended without Adam receiving a direct pay rise, the second example is far more beneficial:
The lesson here is simple: Understanding what your employer can offer is just as vital as assessing your own value.
The origins of business are pretty simple:
This is the basic template for all business in our modern world, so let’s look at it in modern employment terms:
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 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.
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:
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:
This bias can often occur in the workplace due to how we mentally approach challenges. For example:
Both employees are allowing negative thinking to influence their self-worth:
Using what we’ve learned in this guide, it’s likely that in this scenario:
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 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.
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.
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.
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.
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.
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