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I am working for a small private company for last 6 years. I previously recieved 11%, 14%, and 24% pay increase for last few years, but this year my salary increase suddenly dropped to less then 5%. When I started I was very low on the salary range for my position, and it is still below the average.

Should I ask for clarification on what has caused this sudden drop as my manager only mentioned the general factors like market rate, performance etc.. in email.

So how should I go about asking about a significantly lower annual pay increase than my usual?

I thought this was my best year till date. Company is doing nearly as good as previous years.

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    A 20% pay rise is quite significant. Is the sudden increase drop perhaps because you started at this company on a low (or below average) wage and you've now reached (what they consider) an acceptable (market rate) level and/or in line with your other colleagues? – Appulus Jul 27 '16 at 9:06
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    Personal note: this is something I'd raise in person first to get a general idea behind the change. And note that "Should I?" is a bad question for this site, "Can I?" is better. "How should I?" is best. – Lilienthal Jul 27 '16 at 12:26
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    Less than 5% is the norm even for outstanding performers in my neck of the woods. I have even had an outstanding performance review and gotten a 0% pay raise because the company didn't give any that year. – HLGEM Jul 27 '16 at 13:26
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    If your salary is truly that low, you should be able to do much better somewhere else. You are never going to get to market value at that place. – HLGEM Jul 27 '16 at 13:28
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    Is your manager a stakeholder in this company ? I mean is his compensation, somehow, tied to how the company performs ? For instance, does he have substantial amount of shares of this company ? The reason I am asking, if he does and if the company profits are not what the stakeholders expected, regardless how good the company performed (according to you), they might be cutting expenses somewhere. And salaries might be the starting point – MelBurslan Jul 27 '16 at 13:28
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Should I ask for clarification on what has caused this sudden drop as my manager only mentioned the general factors like market rate, performance etc.. in email.

Yes. If you want to understand why, you need to ask.

It seems odd that the results of an annual pay increase would be conveyed only via email. That's usually a great opportunity to review the factors (individual performance, company performance, etc) that led up to the increase. And that sort of information is best conveyed fact-to-face rather than by email.

But you still can ask for a private meeting. Just find a time that's convenient for both of you and ask. You may find that the smaller than expected raise was solely due to general factors, or had something to do with where you are on the payscale for your role, or if there were some individual performance factors at play.

Try to ask in a way that comes across as "I'm trying to understand", rather than "I want to complain". You're more likely to get better feedback with the former approach than with the latter.

In general, when you don't understand something you must ask for clarification.

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An annual 20% pay raise is unsustainable if you work anywhere above minimum wage.

Lets say you make 50K a year. With a 20% pay raise each year, you would end up with nearly 300K anually by year 10. And it would put you at 2 Million per year after another ten years.

Simply put, if you haven't been on national TV as either a genius, athletic superman or criminal convict, this is not how it works in real life.

You get a substantial pay raise, if you manage to get a lot better or get another job through promotion. In most jobs, there is a glass ceiling. After a few years in many jobs, you cannot get substantially better. Somebody selling sandwiches may get really good after a year or two, but you probably cannot tell the difference between somebody doing that for 10 and someone else doing it for eleven years. The latter is definitely not going to make 6 sandwiches in the time it takes the former to make 5. But that would be needed for a 20% raise.

Again, check your assumptions against reality. Just calculate what you would make in 10 years if you got what you think you should get. If that's ridiculous, it's time to think about it.

  • Hi nvoigt, sorry for not able to express myself clear enough, I updated my question – Developer Jul 27 '16 at 12:52
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    OP says that he's on the low-end of compensation, so presumably he started off very low. Right now they're sitting on a ~65% increase in 4 years, which for an employee starting at 40k/year is now 66k. – Chris Jul 28 '16 at 0:56
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Of course you should ask. If it's anything you can correct, you need to know about it.

But your manager may not know either, if it was due to something on the company's income as a whole.

Note that the kind of raises you say you've been getting were unsustainable unless your salary started unreasonably low, the company has been insanely profitable, or your country is experiencing very severe inflation.

  • yes, you are right, I was started on a really low salary and i made my question more clear, sorry for being not clear – Developer Jul 27 '16 at 12:53
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The biggest problem I see in your question is that your boss told you about your raise in an email.

I have always done performance reviews and their subsequent salary reviews as an in-person task. And certainly with some explanation.

Prior to this email, had you and your manager done any kind of performance appraisal? If not, that's probably the place to start.

I would set up a face-to-face with your manager to discuss the raise/performance.

You need to understand your goals for the meeting. My goals would be:

  1. Understand WHY the company offered this amount.
  2. Ensure the company is aware of the work I'm doing/value I'm adding.
  3. Initiate a performance review process. It doesn't have to be official, but make sure your manager understands all the great work you're doing. (regular meetings every 3 - 12 months to set goals and evaluate your progress)
  4. Negotiate a higher raise.

Before the meeting, you want to prepare. Document your accomplishments for the past year. What did you accomplish? How did you go above and beyond? What are some examples where you did more than was asked or expected of you? These are why the company should value you.

If you can't come up with a decent list here, be satisfied with the 5% and focus on setting goals and reviewing them regularly with your manager. Your personal goal for next year would be to have a nice list of accomplishments.

You should start the meeting by explaining that you were a bit surprised by your raise this year. You understand that huge raises aren't sustainable, but you felt like you had another really good year.

Then ask for the company's thinking behind the raise.

If your accomplishments aren't being mentioned or are being downplayed, this is when you would break out your listing of accomplishments. "These are some of the things I did this year that I was really proud of and I think demonstrate my growth and added value."


Edit to add: I would not see this as a "we don't like you and want to fire you!" event. You don't give 5% raises (an above average raise btw) to people you're wanting to let go. You give $0.

The biggest thing you want to avoid is coming off as ungrateful or unreasonable. Avoid statements like.

When I started I was very low on the salary range for my position, and it is still below the average.

That may be true, and there are certainly times to bring that kind of statistic up. I don't think this is one of them. Keep the focus on the good work you're doing and the value that brings the company. There is a range of salaries because there is a range of skills, experience, and value that folks with that title bring to the table.

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