How and when to negotiate a salary? What are the reasons for a pay rise? Read on.

Each company\'s pay system is set up differently. Beside the basic salary, work contracts often specify the employee\'s variable salary component as well. The amount of the variable salary component may also be determined by salary guidelines or stipulated by the union contract. The variable salary component is usually tied to the goals of the department or company, or to the performance of the team or employee, and is also usually tied to the company\'s profit. In some cases, companies only use this kind of variable salary component with job positions that can directly influence the company\'s profit (e.g. with jobs in sales). It may be set on a monthly, quarterly or annual basis.

Before you start your salary negotiations, you should think about the following:

A: When to negotiate a pay rise?  

• At the end of your trial period - At present, many companies use the system of reviewing the salary once the employee\'s trial period finishes. The conditions are usually agreed before taking on the new job. However, in many companies, a pay rise after the trial period does not happen automatically. If you have not negotiated that your salary would be reviewed at the end of your trial period, asking for a pay rise is suitable if the scope of your work goes beyond the originally agreed tasks.
• At the end of the fixed term stipulated in your employment contract - Many companies, especially under the influence of foreign corporations, start a new employee on a fixed-term work contract, customarily for one year. After a year, they usually reassess whether the contract will be changed to a permanent contract. This is also the time when salaries are reviewed.
• If your job description changed - In this case, it is likely that the employer will agree to give you a pay rise, since you were given more responsibility.
• Get ready for your pay rise negotiations - create your arguments, put yourself in the right frame of mind. Arrange the date and time for meeting your superior. Avoid starting a spontaneous meeting. In the same way, avoid getting spontaneously invited for a meeting without being ready to negotiate.
• If your work duties have not changed, it is not suitable to ask for a salary review more often than once a year. (Salary reviews are tied to employee review and appraisal. Most companies carry those out on a yearly basis.)

B: What are the reasons for giving a pay rise?

• The growth of salaries in the economy - Before negotiating one\'s salary, the employee should find out by how many percent the salaries are expected to grow in the entire economy (nominal income) and also what the expected salary growth adjusted for inflation is (real income).
• Company profit - Has your company\'s profit grown? Have salaries in competing companies grown? (In this case, the employee may broaden the definition of competing companies to include both those working in the same sector and those that may not operate directly in the same sphere as the current employer, but present an employment opportunity.)
• If salaries in the company are determined in collective negotiations, the individual negotiation should only follow if the employee expects more than the collective pay rise.

C: What arguments do I use when negotiating my salary?

• To negotiate a higher salary, you need arguments. One suitable argument might be if your company enjoys higher income due to your performance or if you outperformed the set targets.
• In the first step of your negotiation, you may ask for a rise of the fixed salary component. If your employer currently is not planning to increase employees\' basic salaries, you can inquire about the possibility of increasing the variable salary component under the condition of completing certain tasks or projects.
• The growth of salaries in the economy is another valid argument.

D: What arguments are best avoided?

• \"My co-worker is paid better than I am.\" Often the work contract itself stipulates that employees are required to maintain silence about their pay. The employer might go as far as considering the comparison with your co-worker a breach of that clause.
• \"My costs of living have increased.\" Never use your mortgage, the increase of living costs, or the number of dependent children as an argument.
• \"If you do not give me a rise, I\'ll quit.\"

E: How should I behave if I was refused a pay rise?

• Ask for an explanation and assessment of your work performance. You have the right to know why your employer has declined your request and to hear the reasons. Ask your employer under what circumstances he or she can meet your demands.
• Do not express your disappointment. Do not start slandering the employer. Avoid commenting on your employer\'s reaction in front of your co-workers.
• Do not attack the employer.
• Ask what is, in your employer\'s opinion, the earliest date you would be able to talk about a pay rise again. (Reopen this question after six months at the earliest, or agree with your employer when you might be able to talk about the subject again and how else you could contribute to help your nearest salary review lead to a pay rise.)

F: How to behave if you do get a rise?

• Express your thanks, possibly also write an e-mail in response to your salary increase. In these ways, you show that you do not view your pay rise as a matter of course.
• Avoid mentioning your salary increase in front of co-workers.
• Sign your amendment of employment contract (Should your superior forget about signing it, try tactfully asking when you might expect your signed copy of the amendment of employment contract).

If changing jobs, keep in mind during your salary negotiation:

• The overall situation in the company\'s field of business. The situation in the region in which you are looking for employment. The possibility of competition, estimating the number of available candidates applying for similar job positions.
• What your market value is - what specific skills you are able to offer the company. What your previous experience is and if it will be necessary for the company to invest in your induction.
• Mention your previous salary and specify what you are able to offer for that salary. (If the salary in your previous employment was much higher than salaries in comparable jobs with other companies, for example because you worked for a foreign company or for the largest player in the sector, and you realize that you most probably will not get such a high salary this time, avoid mentioning your previous salary. The employer might get worried that the job position would serve you as a \"stepping stone\" and decide in favour of another candidate.)
• The unwritten rule of job interviews is that it is the recruiter, consultant or company representative who brings up the question of remuneration, not the candidate. You should not expect that changing employers will automatically result in a pay rise. At the same time, be aware that salary differences among companies are no longer as high as they were in the past.

If you are a fresh graduate or job seeker, you must realize:

• When negotiating a salary, there are 3 thresholds the employee must set for himself or herself. The bottom salary threshold, at which the applicant is able to accept the job, - the so‑called minimum salary - is determined by each applicant in view of his or her own living costs. To calculate your minimum salary, total the expenses you must inevitably pay each month, such as rent, utility bills, commuting to work. Keep your expenses in mind, but do not mention them to the recruiter.
• The medium threshold that the applicant should consider is the initial salary. This is the salary for which you are willing to take the job. You would like to earn this much because you deserve to and because it lets you comfortably cover your expenses. In order not to push your luck too far and not to put the recruiter off, it is recommended to choose an initial salary, i.e. the number you will name as your salary expectation, lower than your optimum.
• The optimum salary is the threshold which the candidate calculates by adding other expenses to the initial salary. This might be the pay that would make the candidate happy - for example because he or she would be able to not only cover the living costs, but afford paying for a holiday or putting away some savings. You can also mention a salary range, but avoid going too wide (certainly avoid naming a range from 500 to 2000 Euros).
• What your market value is - what specific skills you can offer the company, what your previous experience is and if it would be necessary for the company to invest in your induction.
• Avoid being unreasonably self-confident, exaggerating your skills or comparing the amount of your salary with workers in identical job positions who have work experience.

If negotiating your salary in a small company:

• You have faster access to the company representative who can make the decision. At the same time, however, the chances of the company being able to afford it are lower, as small companies tend to have tighter budgets. On the other hand, in the case of a key employee of a small company, the employer usually tries to keep the worker and is more willing to find a solution.
• Small firms probably do not hold regular annual reviews. Therefore, you can negotiate your salary without the review and appraisal. Again, it is suitable for the subject of salary to be opened once a year at the most, usually before the end of the year.
• Try to receive the information about your promised pay rise in writing.

If negotiating your salary in a large company:

It usually takes longer before the employee\'s situation is solved. At the same time, there usually is greater scope for negotiating the amount of the salary. There are several approval stages, the paperwork is signed by many more people and goes through the payroll department, which manages the company\'s finances.

Employee Benefits

Remember that the employee benefits that the company provides are also a part of the salary. Consider them a part of the employer\'s expenses. Each employee benefit obtained from your employer lowers your own expenses that you would incur if not receiving the fringe benefit.