How to negotiate a pay rise in uncertain times

In the good old days most Australian and New Zealand workers belonged to unions. 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 sandwiches and agree on the standard pay rise.

The process could get nasty. Strikes, lockouts, mass-sackings and even riots were not unknown.

Pay bargaining was even tougher in America where negotiation could involve guns.

Generally pay negotiations would settle down with an agreement where every worker would get a similar pay rise.

What isn’t well known is many managers negotiating with the unions got the same percentage pay rises as union members – in those days merit pay and bonuses were relatively rare.

As a young manager in the UK, I was once in this position – guess how hard I was with the union negotiators during that pay round?

Also, many non-unionised workers, or workers belonging to less powerful unions 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 people 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. 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 personal 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 pay with other staff is a serious offence.

Employers, however, have their company pay data so they can compare your package with other employees – they may have access to pay information from rival companies. This is usually informal, though some organizations 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 coy about salary levels – for precisely the reason that they don’t want to alert existing employees to how much extra they would be ready to pay newcomers. In fact, you don’t usually 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 negotiating. You also need to know if it is 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 should your negotiation fail.

As far as I’m aware, there’s no salary.com in Australia and New Zealand (if you know of one then email me). Salary.com is an US site where you can get fairly detailed data about what other people with your skills 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 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.