How to negotiate a pay rise in uncertain times

Part One: the pay landscape

In the good old days most Australian and New Zealand workers belonged to unions. Pay rises were negotiated centrally – you got paid a fixed hourly rate for the job, higher rates for overtime and that was that. Each year the union representatives and the management would lock themselves in a smoke-filled room, order rounds of take away sandwiches and hammer out an agreed pay rise.

Of course the process could get nasty. Strikes, lockouts, mass-sackings and even riots were not unknown. Pay bargaining was even tougher in America where negotiation sometimes involved guns. But generally pay negotiations would settle down with an agreement that would involve every worker in the organization getting the same percentage pay rise.

What isn’t well known is that the managers negotiating with the unions were often awarded the same percentage pay rises as the unionised workforce – in those days merit pay and bonuses were relatively rare. As a young manager in the UK, I was once put in this position myself – guess how hard I was with the union negotiators during that pay round?

Also, non-unionised workers, or workers belonging to less powerful unions would often get pay rises close to the rates negotiated by the stronger groups. A powerful group would establish the ‘norm’ and then everyone else would use this the benchmark when starting their negotiations.

In countries like Australia, Britain and New Zealand individual pay bargaining of earlier years gave way to centralised pay negotiations during the 1970s. Union leaders still trooped into smoke-filled rooms, but instead of facing local company management they would parley with members of the government and industry heads.

The economic reforms that swept the English-speaking world in the 1980s and early 1990s saw centralised bargaining give way to a system where individuals increasingly had to negotiate their own terms. New Zealanders went on to individual contracts. Many Australian workers – particularly those further down the pecking order were still reliant on centralised negotiations until relatively recently but most white-collar workers and polo shirt-collared knowledge workers have to handle their own negotiations.

Employers prefer the new status quo because it allows them to reward valued employees more than people who contribute little to the bottom line. On the whole this is a good thing that few knowledge workers will argue with – during the boom years we all did well out of this system. Some of us did spectacularly well.

However, from our point of view the down side of individual salary negotiation is that it puts a lot of power in the hands of the employers. That’s because of the asymmetric information flow inherent in one-on-one salary negotiations. Information is central to any negotiation – if one side has better or more complete information that the other party, it is at a distinct advantage.

Companies usually have a policy of ensuring staff don’t talk to each other about their salary packages. In some companies, including places where I’ve worked, disclosing details of your remuneration with other staff is regarded as a serious offence. Of course employers have access too their company pay data so they can compare your package with other employees – they often also have access to pay information from other companies in their sector. Sometimes this is informal, though there are organizations that collect and sell salary data on an industry-by-industry basis.

You won’t get far finding this kind of information from job advertisements. Recruiters are often coy about salary levels – for precisely the reason that they don’t want to alert existing employees to how much extra they would be prepared to pay newcomers. In fact, you don’t often get to know what the salary for a job is until you are at a late stage of the recruitment process.

If you are a prospective employee, you need to get as much salary information as possible before entering negotiations. Indeed, you need to know if it is even worth bothering to negotiate. Likewise, if you are looking to negotiate a pay rise from your existing employer, you need to know what other people doing the same job elsewhere are earning. This benchmark not only gives you useful ammunition, but it also lets you know whether you should stay or move to a new position should your negotiation fail.

As far as I’m aware, there’s no equivalent of salary.com in Australia and New Zealand (if you know of one then email me). Salary.com is a US site where you can get fairly detailed data about what other people with your skill set earn in any particular city or region.

The nearest thing I’ve found is when private research gets published in a public forum. New Corporation’s Careerone often publishes this kind of data. Here’s an example of salary information for Australian jobs. Hays Recruitment offers some New Zealand salary information here along with more Australian data. If you hunt carefully you can find other sources. I’ll share any such similar sources that Knowledge Worker readers send to me.