What Percent is a Good Raise (7 Influential Variables)

This content is permitted for use for non-commercial purposes only. Commercial use of this content is prohibited by PayDestiny’s Terms of Service. Prohibited use includes but is not limited to: repurposing content on social media without crediting PayDestiny, repurposing content for use in publications and online articles without crediting PayDestiny and linking back to this content, and repurposing content for use in books, courses, or applications. Unauthorized use of this content may be subject to criminal or civil penalties for violation.

Average Salary Increase Over 5 years

Traditionally, employers have made pay raise decisions based on how long an employee has been with the company, their performance, years of experience, and variables such as cost of living increases.

Average Salary Increase Over 5 years

This traditional approach to pay raises results in an employee receiving a 5 – 15% pay raise annually. Using the traditional model of issuing raises:

• Employees with less than 1 year at the company get up to a 5% raise
• Employees with 1 – 2 years at the company get up to a 5% raise
• Employees with 2 – 3 years at the company get up to a 7% raise
• Employees with 3 – 4 years at the company get up to a 10% raise
• Employees with 4 – 5+ years at the company get up to a 15% raise

Many employers have realized that the “Average salary increase over 5 years” model to issue pay raises has contributed to voluntary turnover and “job hopping.” To solve for voluntary turnover due to low raises employers are evolving how they make pay raise decisions.

What Percent is a Good Raise

The question “What is a good raise?” is actually not the question you should be asking. Rather to get paid competitively you should be asking “Does my pay reflect what the market is paying for someone with my skills, experience, and track record of success?”

Just like negotiating a job offer you should know what the market is paying for your role and the value of your contributions so that you can negotiate for the right pay raise amount.

Things to consider:

1.) What is your job market paying for someone with your job title, duties and responsibilities, skills, years of experience, and track record of success?
Positions in first-tier markets like New York City, Los Angeles, San Francisco, etc. will earn more than second-tier markets like San Diego and Denver.

2.) What is the size of the company you work for?
Large established publicly traded companies and enterprise companies tend to have standardized pay raise scales for predictable P&L and to avoid wage discrimination lawsuits while startups and SMBs tend to not have standardized compensation practices resulting in subjective pay raise decisions (which can be favorable or harmful to you). 

3.) Did you leave money on the table when you were hired?
If you did not negotiate a competitive salary when you were hired and/or took a signing bonus in lieu of a higher base salary your salary may be below what the market is paying. If your employer uses the traditional “Average salary increase over 5 years” pay raise model then you will remain underpaid.

If you are underpaid, and your employer knows it, they may “give you a big raise” that only brings you to baseline fair market pay. They may hope that you are unaware that you are underpaid and will psychologically think you’re getting a big pay raise when in fact you’re not. This is one of the reasons that it is very important to use market data and personal performance data to negotiate job offers and to negotiate pay raises.

4.) What is the value of your work?
A good pay raise will reflect the value you contribute to your employer. This is why prior to a pay raise conversation you want to list your accomplishments and quantify their value. This will help you clearly explain how you helped the business by:

• Cutting costs
• Increasing revenue
• Maximizing efficiency and resources
• Achieving or exceeding desired outcomes

When you communicate the value of your work and its impact to the bottomline of the business using performance data, not feelings, you give yourself leverage to get a good raise.

7 Influential Variables (That determine if a raise is good)

Ultimately, what determines if a pay raise is good is if the amount is below, equal to, or above what the market is paying for someone in your job market (i.e. city) with your:

• Job title,
• Duties and responsibilities,
• Education, training, and certifications,
• Skills,
• Experiences, and
• Track record of accomplishments (and their value to the company).

What if there is no budget for a good raise?

If you’re offered a raise that is less than what the market is paying for your role and contributions you are in a position to negotiate for benefits that monetarily equal the amount of money you are leaving on the table.

For example, if the market shows that you should be earning $7,000 more per year in base salary than you can negotiate for:

• Additional paid time off, 
• More stock options, 
• Profit share, 
• Tuition reimbursement , 
• 401k match increase, and
• Other income impacting and life enhancing benefits. 

The time it takes to hire and replace an employee that job hops can be up to nine months. The cost to replace an employee, depending on specialty and seniority, can be up to three-fourths of the position’s salary. Employers want to retain great employees so don’t be afraid to confidently, politely, graciously, and positively negotiate a good raise. 

What if my boss says my performance doesn’t merit the raise I want?

In the case that your performance was basic or mediocre you may receive a raise but not a good one. To get a better raise next time around, and more importantly enhance your performance to keep your job, ask your boss for a list of what they would like to see from you.

Clarify what they would like to see from you by getting (or confirming) metrics that determine success. Then track your performance based on the responsibilities of your position and what your boss said they want to see.

When you are consistently exceeding expectations, schedule another conversation with your boss to present your performance data and request the raise that you want.

What Percent is a Good Raise (FAQs) 

Conclusion

There is no one size fits all answer to the question “What percent is a good raise?” What matters most is how your raise compares to what the market is paying for someone in your position and how your contributions have impacted business drivers. To get a good raise, research what the market is paying, prepare a quantified list of accomplishments, and use data to negotiate for a competitive pay raise.

Are there any questions about pay raise percents that are not covered in this article? Leave your question(s) in the comments and I’ll make sure to answer.

Do you want a step-by-step process to learn how-to ask for a pay raise, personalized templates and scripts that tell you what to say, and mock pay raise negotiations to help you build skills to ask for, and negotiate, a good pay raise? If so, create your PayDestiny account today!