The topic of pay raises can be sensitive for both employers and employees—in fact, so sensitive is this information that many companies have policies prohibiting workers from discussing salaries with each other.
But pay remains an unavoidable topic, and perhaps more so as it’s been a while since many employees have seen substantial wage growth. On average, U.S. employees can expect a small pay increase in the upcoming year—just 3% according to a recent study. But as this is only slightly above the rate of inflation, many workers will not feel a big difference.
So what will those conversations surrounding pay look like in 2018? Recently we surveyed 1024 US workers to get a glimpse into the details. And while an overwhelming majority of respondents would like more money, more than half were willing to put an exact number on it: $6000. However, more than two thirds would consider additional benefits such as healthcare over a pay raise. Meanwhile, men are more willing to ask for large pay raises than women.
Let’s take a closer look at our findings, and consider steps that both employees and employers can take to feel more satisfied with the outcomes of their salary discussions.
Only 19% of employees are comfortable with their rate of pay
Underwhelming pay raises in past years haven’t gone unnoticed by American workers. According to our findings, less than 1/5th (19%) of the people surveyed are comfortable with their current rates of pay. In fact, when asked to put a number on how much more they would need to feel comfortable, more than half (60%) of Americans say that they would need to earn at least an extra $6000 each year.
There is a notable gender gap in these findings, with 21% men and just 16% of women feeling comfortable with their current salaries. Certain regions of the country also feel that they have it better than others, with people in the West feeling most content (21%), followed by the Southwest (20%), the Midwest and Southeast (both 18%). Employees in the Northeast feeling the least comfortable with their salaries (16%).
More than half (54%) of respondents would consider changing jobs to get a pay raise
We took a closer look at which factors might be contributing to this general dissatisfaction, starting with how long it had been since employees last received a raise.
The workers we surveyed received a salary change at their current company an average of one year and five months ago. And close to 70% of respondents received a pay change within the last two years (about half of were those within the last year). Only 17% of respondents have never received a pay change at their current company.
Again, some regions fare better than others. Just 13% of respondents in the Southeast hadn’t seen a change in pay rate while at their current companies. But in the West, this percentage was the highest at 24%, despite the comparatively higher rates of salary satisfaction in this region.
Of course, while it’s obvious that these issues are important to employees, it is critical that employers should also be invested in these trends. Organizations can lose their most talented workers to companies that offer better compensation and raises. In fact, our survey found that more than half (54%) of respondents would consider changing jobs to get a pay raise.
Men are more likely to ask for bigger pay raises than women
With so much dissatisfaction, it’s no surprise that almost half of respondents say they’ll definitely (23%) or possibly (24%) ask for a raise in 2018.
Millennials represent the age group most likely to request higher pay. Over 32% of 25-34 year old respondents definitely plan to ask for a raise in 2018, compared to just 17% of respondents 55 and above. Of course, it’s worth noting that Millennials are at an earlier stage in their careers and so frequently earn less than workers in other age groups, providing them with an extra incentive to ask for a pay increase.
But how much do people want? 47% of respondents that plan to ask for a raise will request a salary increase of 6%-10%. On average, most people will request a 7% salary increase, except for respondents in the 45-54 year old age group, who will ask for a 6% average increase.
While there’s virtually no difference in the percentage of men (52.9%) and women (53.1%) who will ask for a raise, we do see the Gender Pay Gap reflected in the size of the raise men and women plan to request. More than half (54%) of men expect to ask for a 6%-10% salary increase, compared to just 41% of women. Women are far more likely to ask for the lowest range of salary increases, with 52% planning to ask for a raise of 5% or less, compared to just 35% of men.
People want raises because they feel they have earned them
Cost of living is not the most common motivator behind raise requests, with fewer than 2 in 5 respondents citing this as their reason. This was the case across all regions of the country, even in areas with a notoriously high cost of living such as California and New York City.
The most common reason behind raise requests? Simply put: People feel that they’ve earned it. 3 out of 5 respondents who expect to ask for raises are doing so because they believe their good performance should be rewarded.
Dissatisfaction is also a factor for some employees, with about 2 in 5 of these respondents requesting raises because they’ve taken on extra responsibilities without getting a salary boost.
A little over 1 in 5 of these respondents are asking because they feel a raise is overdue, and about 1 in 5 plan to ask because they feel underpaid in comparison to their peers.
68% of workers would consider additional benefits as an alternative to pay raises
Of course, while many employees may ask for significant raises, a good number of these requests will likely be denied.
We surveyed workers about their previous requests for raises. Among employees who were turned down in the past, 70% of respondents were told that there was no budget available, 18% weren’t given a reason and 5% were told they hadn’t worked for the company for long enough.
Interestingly, 74% of men who were denied a pay raise were told there wasn’t enough money in the budget, compared to just 64% of female respondents. Meanwhile, the female respondents (21%) were more likely than male respondents (13%) to not be given a reason at all.
For companies with limited cash for raises, offering additional benefits can be a strong alternative to a higher salary. More than two-thirds of respondents (68%) said they’d be open to this type of offer. The top three benefits workers would be willing to accept are:
- Healthcare benefits (36%)
- Flexible work hours (35%)
- More annual holiday leave (34%)
We also asked employees about parental leave policies, which some major companies have recently been expanding. About 9% of respondents said they would be willing to accept this benefit instead of a pay raise, with workers under 35 making up the majority of those interested.
But while many employees may be dissatisfied with their state of pay, they’re still reasonably optimistic when they compare their compensation to salaries of workers in other countries. Only 1 in 5 respondents think American salaries are generally lower than average salaries in other countries.
However, there is a striking difference in how men and women view American salaries. Nearly half (49%) of male respondents think American salaries are generally higher than those in other countries, while just 25% of female respondents—who still on average earn less than their male counterparts—share this belief.
Tips for handling salary conversations
So what can employers take away from this? Knowing that a good portion of employees plan to ask for a raise this year, managers can start preparing now. Before it’s time to make those decisions, run salary audits and compare your company’s compensation packages to your competitors’ salary ranges to learn whether you’re paying enough.
If cash is truly limited, get creative with benefits by offering work-from-home options, opportunities for travel or relocation, development opportunities or additional PTO.
If you’re the one asking for a raise, come prepared to showcase your accomplishments and discuss the average pay rates for professionals in your position and with your level of experience. You can research this information using Indeed’s salary tool, which lets you search for your job title and find pay distributions, the most commonly reported salary, and more.
Whether you’re asking for a raise or making salary decisions, keep in mind that while pay rates are important, there are dozens of other factors that contribute to job satisfaction. By having meaningful and productive conversations about the position as a whole, employees and employers are more likely to walk away feeling good about their negotiations.