QUESTION: I didn’t see you post about it, so I am wondering if you are following what is happening with those huge government pay increases? Anyhow, there is a different angle I am asking you to look at it from, that is to say, if senior management in private sector could increase the pay of staff by 200 per cent or 300 per cent. Do you think that is crazy or possible? If it is possible, what stops them from doing it, because most people are not being paid their worth in the private sector? Hypothetically, what would I need to do to approach the possibility of asking my boss for a big increase?
– Social media user
BUSINESSWISE: Years ago, an acclaimed private-sector leader, responding to a question posed to him at an event on the issue of paying employees higher salaries, provided a persuasively capitalist response:
I am willing to pay anyone any salary they ask for, it does not matter how much, as long as they can demonstrate how they will earn in excess of that and deliver.
It is a perspective that is shared by many entrepreneurs and business leaders I know, and likely the lens through which they would process the many interesting and timely questions you have put forward.
The short answer is yes, it is possible for some salaries to be doubled and tripled, and it is not at all crazy. However, the likelihood of it happening, and, ultimately, what is stopping companies from doing it, which is your second question, is multifaceted.
Here are just a few of the expansive range of possible issues that would affect or preclude companies from paying massive pay increases: unacceptable total factor productivity relative to industry, poor labour productivity, market dynamics, competition and competitiveness, inadequate output, or capacity to produce, costly employer statutory obligations, employee bargaining and negotiation tactics, company values and policies, advanced AI and automation, and most importantly, profitability.
Now, let’s explore your third and final question, which deals with pitching a pay hike. In order to convince your employers to grant you a massive 200 per cent or 300 per cent salary increase, all things being equal, you would likely need to do the following:
1. Show where the cash would come from to pay your salary. In other words, you would need to demonstrate that there is immediate demand (or what some local business operators colloquially refer to as live cash from profits earned) from either of the existing or new markets.
2. In the event that you are being grossly underpaid, you would need to show that the position that you occupy produces at a level that is well above its assigned budgetary allocation, or that the company is paying below the prevailing market rates, and/or that your duties expand beyond the realm of your position and job description and that those additional functions are adding substantial value that the company has ignored.
3. Demonstrate that increased human resources expenses won’t make them uncompetitive relative to competitors or new market entrants, and would be sustainable and not strain cashflows in the short, medium, and long term. Employers won’t want to chase fads and will be hesitant to alter their business model without merit.
4. Show that you would or are producing output that is valued at four times your current productive capacity, or more. Recall the business leader’s answer to the question of increases.
5. Convince them that your salary increase won’t stir up internal upheaval. Bosses don’t want to compromise policies, procedures, and guidelines related to pre-existing pay scales, grades, or ranges, and the current collective bargaining, or employee negotiation infrastructure. Well-run organisations aspire to be fair, and to be seen as fair to all employees. Therefore, a pitch for increase must address the potential risks, downsides, and negative consequences from any preferential treatment afforded to you. Always consider the ripple effects beyond your own situation.
6. If your salary increase is premised on new production, ensure that you cover the fully loaded cost for expanded internal capacity needed. Therefore, as an example, if you are proposing a new income stream, then review all facets required to operate, not only your role and responsibilities. Include increased oversight of yourself and others and a careful examination of whether your boss even has the capacity to do so. If your company lacks human, technical, technological, and financial resources to expand, then outline viable solutions.
7. Never position your ask as ‘I must be paid my worth’ because companies don’t usually create job offerings and decide how much to pay based on the unique worth of individuals who apply to fill them. They don’t calculate on an individual basis the actual ‘worth’ of skills, experience, knowledge, know-how, and attitude. It would be complex and is not likely to serve their interests in a purely capitalist society driven by maximising profits and minimising costs. Instead, they have budgeted allocations, usually on a scale, for positions or roles. Then they identify talent to execute and offer compensation aligned with pre-determined amounts for the position.
These are just a few of the things you would need to do, in my view, to produce and deliver a robust pitch that may find favour with your boss.
Regardless of the outcome, this type of comprehensive and thoughtful approach is useful. It may even show your employer your capacity for expansive thinking and planning, innovation, ideation, and business growth, among others.
However, be cautious because some employers may be limited in their world view and see your pitch as presumptuous and undesirable.
Good luck! And please let me know the outcome if you decide to proceed.