I work for a fortune 500 company in the Healthcare IT industry. I've been working at my job for a year and a half.

I got a promotion on my first annual cycle, and with that came a 3% raise. A 3% raise feels about like a cost of living raise. I believe most other people get that same amount.

My question is, is that typical? Should I have received more of a raise with a promotion? It is my understanding that a cost of living raise is designed to keep your salary consistent with inflation and that it is something that is pretty much expected even for an average employee.

  • More information would be helpful. How would you rate your performance compared to your coworkers? What is the industry? How is your company doing financially? – Roger Jul 17 '14 at 13:03
  • My manager has told me that I am good work by comparison. I was one of 2 people in my department that got a promotion when the annual cycle came up. I'm in the Healthcare IT industry working for a fortune 500 company. We did have a lower than expected first quarter, but not terribly low. We are still doing very well financially. – Hoopdady Jul 17 '14 at 13:06
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    The answer to this question is entirely dependent on the performance of the company, your performance and raise history, and whether you are a line worker (directly tied to core business) or working in a cost-center. Even then, if all those things are in your favor, your own company might be too greedy to distribute raises to those that aren't owners or executives. If they aren't paying you enough, just vote with your feet! – teego1967 Jul 17 '14 at 15:57
  • Just a thought - perhaps you were "topping out" in your current pay grade, and the promotion moves you from 4th quartile back to 1st quartile. Your next pay adjustment MIGHT be better. – Dan Pichelman Jul 17 '14 at 17:46
  • What type of a promotion was it? Since you said it happened on your annual cycle, I'm wondering if it's something like "Software Engineer" to "Senior Software Engineer". For something like that, I wouldn't necessarily expect a significant raise. – David Yaw Jul 17 '14 at 22:42

My question is, is that something something be happy about?

Happiness is personal.

You can choose to look on the bright side "Hey, I'm making 3% more today!" or the dark side "Only 3%. That's how much my personal cost of living has increased, so it's like getting nothing."

My personal cost of living increase is almost certainly not the same as yours. Some people are paying a lot of rapidly-increasing health care costs, for example. Some people are saving for college educations that are rising more rapidly than inflation. Others are living a life that isn't getting much more expensive the past year or so.

Happiness is very context sensitive.

In my company, 3% has been the norm for the past few years. But I also remember a time when single-digit raises were devastating, and a clear sign that you needed to move on to keep up with inflation.

It is my understanding that a cost of living raise is designed to keep your salary consistent with inflation and that it is something that is pretty much expected even for an average employee.

It always depends on how one measures inflation, and the cost of living. Here's a calculator which seems to indicate that inflation in the US has been under 3% for a while - http://www.usinflationcalculator.com/ . That may or may not be an accurate measure of your personal cost of living.

For those collecting Social Security in the US, their Cost of Living Increase in 2014 is only 1.5%

Perhaps it is true that in your part of the world, in your field, that 3% is an "average, keep up with the cost of living" raise these days.

You still get to feel happy, if you choose, that your company values you enough to want to keep you around.

Or you can feel sad that your company considers you only average.

Your choice.

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  • Ok... maybe happy was the wrong word. I'm a generally happy person. I feel kind of greedy even asking this question. I was more trying to determine if this is typical. – Hoopdady Jul 17 '14 at 13:08
  • I have reworded the question to take some of the subjectivity out of it. – Hoopdady Jul 17 '14 at 13:11

Personally, I would be bummed if I got a promotion and it only came with a 3% raise. (unless the promotion was a very very small one, or it came with other notable benefits like a company car, travel benefits, etc)

You have to consider what responsibilities you've gained and what benefits you've gained. (salary, company car, more PTO, etc) and decide is the added benefit reasonable for the added responsibility. (I've refused promotion with a disproportional small raise before, ultimately I still got the promotion, but after we negotiated something closer to reasonable)

Keep in mind everyone's situation is different. Is your company financially stable? Did your promotion add a ton of extra work or was it more so just a formality? All in all, I personally would not be happy at face value of what you described.

Edit, 3% it my eyes is unusually low for a promotion.

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  • I agree. Salary raises should be the company's way of saying that you're valueable for them and this is how they show their appreciation. But 3 % is so low that you won't even feel it. It's like getting nothing at all. Personally, I consider 5 - 7 % to be the absolute minimum of any raise. If you, as a company can't afford it, don't do it (3 % is just too lame to even mention...) – Radu Murzea Jul 17 '14 at 14:25
  • @RaduMurzea couldn't agree more, to retain me as an employee the company I work for MUST give me at least a 5% raise annually even when there is no promotion (I am a mover and shaker who's very ambitious, I always have a treasure trove of ammunition for fighting for a raise) the only exception I give is if the company has a really bad year, I will defer a raise to the next you (only once) but at that point I still expect both the 5% from the deferred year plus the 5% for this year. (If a company is still in bad shape I take it as a sign it's time to leave this sinking ship) – RualStorge Jul 17 '14 at 14:29

Can you ask what the average pay increase is for people who did not get a promotion? My guess is that that 3% was above average for most companies this year. Most people are not getting big raises these days, and often without a promotion it is not even enough to really keep up with the cost of living.

In some companies, your pay increase within a job category depends not only on your performance and the company's financial situation, but also how much you are making relative to others in your job category, with those at the lower end more likely getting larger raises, if their performance is also good. So, if your small increase with the promotion puts you near the bottom of the pay range for your new job level, that may set you up to get another small but above-average raise next year.

I think in most companies you can set up an appointment with your manager to ask about pay policies, and find out things like the average raise for someone in your company at your job level, and so on.

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  • Yeah, we have an off cycle evaluation 6 months after your annual cycle where you can potentially get a raise. But when I asked about it, I was told we're going to shoot for another promotion in January and it would be hard to justify a promotion then if I got an off cycle raise now. – Hoopdady Jul 17 '14 at 13:58
  • I would make it clear what you want / expect to be paid for the promotion. Don't just accept "they offered me X, so I take it." Negotiate! It's your job to make sure you get what you deserve. – RualStorge Jul 17 '14 at 14:09
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    @Hoop:So you just got a promotion and in 6 months you might get another promotion? It seems like your company has so many levels to be promoted into that getting a promotion isn't that big of a deal. Thus, your 3% raise. Companies I've worked at take at least 2 years between promotions and that's if you are on the fast track. – Dunk Jul 17 '14 at 21:46

Yes, a cost of living increase is a bad sign. It is essentially the company saying with actions "you are worth just as much to us this year as last".

If you received a promotion, or expanded your role or responsibilities, you are 1) either taking a pay cut, or 2) the company thinks that there are suddenly more workers in your area that could do your job (increased supply leading to decreased cost) or 3) the company thinks that there are suddently less jobs in your area that you could do (decreased demand leading to decreased cost). None of those 3 things are good for you.

Now, 3% may or may not be a cost of living raise depending on what inflation is in your locale. Do some research.

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  • @JoeStrazzere - I suppose, I forgot about that. Every place I've seen that has done that then proceeded to not give the corresponding raise. – Telastyn Jul 17 '14 at 15:00

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