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I have a great job that I like quite a bit. However, I feel that I am a bit underpaid.

I have thought about asking for a raise several times. I have not for because I feel my employer will(correctly, I might add) deduce the following.

From their perspective:

This guy will never take below the market rate for his position. Therefore, there are only two outcomes.

1) Either We always pay him market rate. We will never be able to underpay him.

Or,

2) We refuse to pay him market rate, and he will probably leave.

As an employer, wouldn't you immediately remove an employee like me from your company's long term plans unless I am definitely "worth it"?

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    This is too theoretical to be an answerable question. Have you considered the possibility that your employer is happy to pay you more but is also happy to underpay until you summon up the courage to ask? – Nathan Cooper Feb 17 '15 at 17:57
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    You forgot option #3: "He dared to ask for a raise?! Let's make his life hell until he quits." – James Adam Feb 17 '15 at 18:12
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    You're underpaid because you won't ask for a raise. – user8365 Feb 17 '15 at 19:17
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    When I wrote a document showing 'similar to' pay for my position, responsibilities, and experience, and asked for a raise I was told, "That's not how we do things here." - and it was held against me by that individual for years. I don't know if it affected my career though. – CramerTV Feb 17 '15 at 23:44
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    @CramerTV Sounds like a good time to find a new boss. – Joe Feb 18 '15 at 2:12
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If you are expecting your employer to have a file on you somewhere that says "this guy asked for a raise once, therefore always pay him market rate" - give up. I know of no situations like that. Nor is it ever particularly reasonable for a manager to make that assumption - people are inconsistent. One year an employee with every reason to leave for a better job will come and ask for a raise. Three years later that employee may have kids, a spouse and a mortgage, and suddenly the commute + the health benefits are a big win and a difference of $10K just isn't worth the job hunt.

What actually happens in most companies is:

1 - Every so often, someone does something astounding - a good boss makes a note, and figures out a useful reward w/in the company's "rewarding awesomeness guidelines".

2 - On a periodic and scheduled basis, the management & HR structure together review the performance and salaries of ALL employees and figure out what may be done to change (hopefully for the better) this compensation. Usually this is yearly. Sometimes it is unified (figure out performance --> figure out compensation), sometimes less so... but in most cases, there is some vague approach to considering the following factors:

  • How much can we afford to improve pay?
  • How likely is it that we will lose people to better paying jobs in their skill sets if we do/don't pay this much?
  • Who is most unfairly paid (usually done in terms of salary bands - those at the upper ranges of a job category get smaller increases than those at the bottom ranges)
  • Who is so awesome we can't live w/out them? (and who would we vote off the island first?)
  • Who has what pre-existing incentives to stick around? (ie, not yet vested stock options, retention bonuses, etc)

With all that math in the works, bosses don't often consider "who asked for a raise over a year ago?"

3 - At economically predictable but irregular intervals, the company becomes aware that it has a retention problem. The most common case is that some seriously noticeable percentage of reasonably awesome people give notice because they got a better offer. Some % of these people may be seduced back by improving the salary at their current job... but some are always lost. At this point, the company takes a look at the market pay rates and figures out if it can/will do something abruptly to make it less enticing for other members of the company to stick around.

4 - Once in a great while an employee says "pay me more or I'm leaving". This may cause #3 to happen for that individual... or the company may say no. At that point, the onus is on the employee to either leave or stay.


With #4, if the company calculation is: - holy cow, we need this guy! - wow! we've really been underpaying him?! - yeah, we can afford it

Then you'll probably get a raise. If some of these factors don't add up, the answer will be no.

The outcome later on is: - if they say no and you choose to stay, the company will have learned that they can say "no" and you may still stay.

  • if they say yes, they won't really expect you to ask again all that soon. "Soon" is a variable term, but generally if you are asking too frequently, then the company will probably move quickly to the "no" answer to see what will happen.
  • Awesome answer. It really lays out the calculus behind the company's thinking and helps me to understand why certain things happen and others don't. – Adam V Feb 17 '15 at 19:34
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    Re: "the company [...] figures out if it can/will do something abruptly to make it less enticing for other members of the company to stick around": I think you probably mean the opposite of this? – ruakh Feb 18 '15 at 4:01
  • On point 4, you have saying At that point, the onus is on the employee to either leave or stay.. Did you meant 'bonus'? – Ismael Miguel Feb 18 '15 at 10:08
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    @IsmaelMiguel dictionary.reference.com/browse/onus – vascowhite Feb 18 '15 at 11:30
  • @vascowhite I wasn't aware of such word. It's the first time I see it. Thank you for the link. (Lets hope the mods don't delete it) – Ismael Miguel Feb 18 '15 at 11:40
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Retention is more valuable than simply 'keep people who we pay less than market for'. It's not like a football team, where you have to figure out how to get underpaid people who are largely equivalent parts; even in retail, it costs you something to hire and train a new staff member.

Professional companies have even more at stake: if you have relationships with clients, if you are the primary developer for a major project, or if you are a popular manager, you give the company value personally, separate from your 'market value'. You walk out that door, even if they have very good knowledge transfer protocols, they lose something in you personally. You also are a sure thing - even if you're not a top 5% performer, they still know what you are, if you've been there a few years. If you're meets expectations, well, they know that, and know what they'd have to offer to have a 50-50 chance at another equivalent person.

Secondly, companies want to retain you and know that you need to be happy to stay. A person who feels he's underpaid is unhappy. A good manager should always discuss salary expectations periodically (at least once a year, at review time) with his/her staff. If your manager isn't doing that, there's no harm in discussing things with him/her in such a way that you are satisfied.

If you come up to your manager and say "I want a raise or I'm leaving", well, you're right: that's the beginning of the end. But if you come to your manager and say "Hi Betsy, I'm starting to get older and thinking about my future - might want to get married, have kids, buy a house, all that stuff. Can we talk about my salary? I'd like to know when I can expect a raise and/or promotion, and what the typical schedule is for someone in my position", you should get a reasonable response.

Or, "Hi Betsy, I've been working here for a few years with a fairly low salary since I started with no experience. But now that I've got 3 years' experience, can we talk about making sure my salary is commensurate with what someone with that experience would be paid?" After all, you are a different person than you were when you were hired - you have X years more experience, and a person with that experience hired off the street is probably paid more than initial-you was paid.

Either way, if you address it to your manager politely, not as a demand but as a conversation, it won't be viewed as a 'leave now' or anything like that. It's part of normal business, and something that if you're not doing at all, you're getting the short shaft. It's like buying a car - sure, you can just agree to pay what the salesman says, if you want to buy their kids extra Christmas presents, but they won't just write you off if you negotiate; negotiation is expected and built into the numbers.

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    While more popular answer explains what goes into equation of company's decision, this answer actually gives better actionable advice. – konung Feb 18 '15 at 0:33

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