Can You Negotiate a Cost of Living Increase?
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In Brief: (1) Focus your conversation with your manager around a general salary negotiation with inflation weaved in as a talking point. (2) Be prepared to show why you deserve a raise and how you will continue to add value to the company. (3) Pay attention to the climate at work before asking for a raise.
A cost of living increase is a pay raise that adjusts your salary to match a rise in the cost of living due to inflation. Now that inflation has “reached its highest level in four decades,” according to LinkedIn News, more employees are seeking salary increases to account for it.?
What to Know About Cost of Living Increases
Whether you have to ask for a cost of living increase depends on the company. Some companies automatically give their employees a salary bump to account for inflation.
“Most good companies, more established organizations, will offer a few percentage points increase in salary. Some progressive organizations have actually offered up to double-digit increases.
“My last employer actually offered raises and they tiered them. The lower income brackets of the organization got up to double-digit raises.”?
— Sam Struan is a salary negotiation coach and resume writer.?
??In real life: Forbes reported that workers "don’t perceive themselves as having as much leverage and power right now as they do” when it comes to asking for a raise. One thing you can do when negotiating your salary is to “have a specific number in mind and make the first offer. If it's a no, ask what you need to do to get [a raise] — and then don’t let the conversation stop without concrete specifics.”
How to Ask for a Cost of Living Increase?
If your company doesn’t automatically give a cost of living increase, you need to negotiate.?
The key is to not make inflation the focus of the conversation. Instead, show why you deserve a raise by highlighting your work accomplishments and detailing how you will continue to provide value to the company.?
??In real life: LinkedIn News reported that “many workers are seeking big pay rises this year” due to the rise in inflation, but landing one takes strategy. “With 66% of companies saying they won’t factor inflation into salary budgets, simply telling your boss about the rising cost of everything is unlikely to score you a significant raise.”
“Prepare before you start the conversation. If I were asking for a raise for the cost of living, I would couple that with some other things. Everybody is suffering right now, so if you are asking a business, ‘Hey, can I have a cost of living raise?’ They are going to say, ‘Well, we have got a cost of doing business that has gone up and it's hard.’ I would couple it with a different kind of thinking. ‘What am I going to bring to the organization besides showing up?’
“The good business reasons are, ‘This is what I have done in the past and what I'm going to do for you in the future. I want to continue providing great services, and like everyone, my expenses have gone up with the cost of living.’ And then I would ask, ‘Have you looked at my compensation?’ Or, ‘How would you think about increasing my compensation?’ Then I would shut up and let them answer.”
— Linda Swindling is a global negotiation expert and author of “Ask Outrageously! The Secret to Getting What You Really Want”.
When negotiating your salary for any reason, including a cost of living increase, tie your reasons to your performance.?
“When it comes to cost of living, I think that should only be a small factor in asking for a raise. And I would actually rather encourage people to ask for raises based on performance, deliverables, going above and beyond your role. And the reason being is you have more control over this output. If the cost of living doesn't increase next year and this year you ask for a cost of living increase in salary, then it is an external factor that you have no control over.?
“It also might set precedents that your company only gives you a raise when the cost of living goes up. Whereas if you tie it to performance, deliverables, metrics, then you can ask for a raise time and time again, but also, again, you have more control over those factors.”?
??In real life: Business Insider reported that according to recent surveys of U.S. employers, “most businesses will be unable to provide raises that match the current level of 8.3% inflation.” They added, “Surveys by Salary.com, Payscale, and WorldatWork predicted salary increases between 3.8% and 4.4%., which is nearly half the current rate of inflation.”
When to Ask for a Cost of Living Increase and When to Avoid It?
A slight increase in the cost of living might not be enough to sway an employer to increase your pay, so it is important to know when the rise in inflation justifies a boost in your salary.
“A lot of employers do offer 2% to 3% salary increases on a standard basis. That is somewhat common, and maybe anywhere between 1% to 5% is common. In this case, when inflation is approaching double digits, it is appropriate to ask for a [cost of living increase].”
Regardless of the economic climate, pay attention to the inner workings of your company before asking for a cost of living increase.?
“[You] should not ask for a raise when you know [your company] is about to do layoffs. When they are about to do layoffs, you want to be the person that asks if you could be helpful in a way. So, ‘I have seen that we are dropping the ball over here. Can I pick that up for you?’ You want to be the person that knows the thing nobody else knows or knows the information nobody else knows, or is willing to do a job that nobody else does.?
“That said, you can say, ‘Is this a good time [to discuss a salary review]’? If your boss says no, say, ‘I heard you say no. Can you tell me about that?’ And then listen to what the boss says. If you don't risk hearing no, you will never know.”
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Meet the experts?
Sam Struan is a salary negotiation coach and resume writer for $100K- $300K+ roles. He has reviewed over 15,000 resumes throughout his career and has helped clients negotiate over $350,000 extra in salary.
Linda Swindling is a global negotiation expert and author of “Ask Outrageously! The Secret to Getting What You Really Want”. She is also a TEDx speaker and certified speaking professional.
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