10 ways to get the most pay out of your job
A lot of people assume that more pay can come only from winning a promotion, or finding a new job elsewhere. But there are ways, large and small, to put more money in your pocket each week. Separately, these strategies may not be enough to change your life. But put several together, and they start adding up.
“It’s nickels and dimes that can get you to a dollar,” says Alan Johnson, managing director of Johnson & Associates, a New York pay consultant. “A thousand here and there can add up to real money.”
Here are 10 tips from compensation experts, human-resources managers and employees on how to beef up your pay.
1. LISTEN TO YOUR BOSS
You may work harder than the people around you, but your annual raise and bonus award may still be lower than theirs. That’s because your co-workers are getting more of the right things done than you and making sure their boss is aware of it.
“To say it concisely, the main way to increase your paycheck is to do a good job and make sure the right people know about it,” says Craig Schneier, executive vice president, human resources, for Biogen Idec Inc., a Cambridge, Mass., pharmaceutical company.
The best performers received raises averaging 9.9 percent in 2005, compared with 3.6 percent for average performers and 1.3 percent for poor performers, according to a survey by Hewitt Associates, a consulting firm in Lincolnshire, Ill. Thanks to compounding, those differences translate into a lot of money over time.
Hewitt offers the example of three hypothetical employees, each hired in 2001 at a salary of $50,000. They then received salary increases related to their performance. After five years, the poor performer earns $52,807, the average performer makes $57,821, and the top performer earns $72,078. (Hewitt calculated the final salaries based on actual increases for the three types of performance since 2001.)
What’s more, don’t assume you know what your manager expects, and don’t be afraid to ask. You must understand exactly what he or she thinks is outstanding performance in your position, says Laury Sejen, practice director of strategic rewards for Watson Wyatt, a global compensation consulting firm.
Have two meetings with your manager, she advises. At the first, ask how you can earn the maximum amount of pay over time at your company. This can tell you what career goals to shoot for. At the second, ask how you can receive the highest salary increase.
“Some organizations struggle to set objectives,” says Ms. Sejen. “You can take the responsibility to have it clarified.”
Write down what you both agreed to and give your boss a copy, says Steve Gross, head of rewards consulting in Philadelphia for Mercer HR Consulting. At the end of the year, you can use this list to discuss how well you performed against your goals.
“Now you both have a scorecard for the performance review, which makes it easier for your boss to recognize your performance,” Mr. Gross says.
You don’t have to brag to get a top-dollar raise. Simply citing your accomplishments will set you apart “because a lot of people don’t take the time to do it,” says Paul Dorf, managing director of Compensation Resources Inc., an Upper Saddle River, N.J., consulting firm. He adds that if you have no significant contributions to list, “you probably shouldn’t be seeking more money.”
2. BET ON YOURSELF
Having a bonus tied to performance goals and hitting them can get you more money annually. More than 95 percent of companies offer a chance to earn annual bonuses to executives, while 80 percent offer them to managers, 68 percent have plans for professionals and 54 percent award them to clerical and technical workers, according to Mercer HR.
Target bonus awards vary by industry and company type, but a typical bonus for an employee earning $50,000 might be 10 percent of salary, while someone earning $75,000 in salary might have a 15 percent target bonus and a $100,000-a-year employee might have a 20 percent target, Hewitt reports.
The key to receiving more bonus money is superior performance. If you meet your goals, you should receive your target bonus amount. But at some companies, if you exceed the targets set for you, you may receive an award that exceeds your target bonus. At Biogen Idec, for instance, high-performing employees can receive up to 200 percent of their target bonus amount, says Mr. Schneier.
In the mid-1990s, Eric Herzog was director of marketing for a computer-hardware-storage company in Silicon Valley that paid its senior executives salaries only. Mr. Herzog says he wanted the potential to earn more money, so he told the chief executive officer that the company might be more successful if it created an annual bonus plan for executives that was tied to revenue and profit goals.
He explained that every executive had the ability to influence profits and that the plan could be designed so that bonus awards would be distributed only if the company made more money. Having all six of the company’s executives in the plan was key, because then they would aim toward common goals, Mr. Herzog says he told the CEO.
The CEO agreed and created a bonus plan tied to revenue and profit objectives. “We hit the goals, and I received 20 percent over my base pay,” says Mr. Herzog, now a vice president of product management, channel marketing and communications for Maxtor Corp., a computer-hardware-storage company in Scotts Valley, Calif.
It’s hard to increase the size of your target bonus once you’ve accepted a job. But when negotiating with a new employer, you might be able to swap a higher salary for a larger target award amount, Ms. Sejen says. Suppose the employer offers you a $100,000 salary and a target bonus of 10 percent of salary. You could counteroffer that you’d take a $95,000 salary if your bonus-award target was 20 percent of it. Your annual target pay then would be $114,000 instead of $110,000. “An employer might be willing to change the pay mix,” Ms. Sejen says.
3. SEEK FINANCIAL ADVICE
Executives who are skilled at running their companies often aren’t so skilled at managing their own finances. Many could benefit from financial counseling so they know what to do with their stock options, restricted stock plans and other long-term incentives, says Mr. Dorf of Compensation Resources.
“Most executives, if pushed, would say they are financially challenged when it comes to doing their own deals and could use a financial counselor to advise them,” he says.
One little-known Internal Revenue Service regulation allows executives to pay tax on the value of restricted stock when they receive their grants. This may help lower capital-gains taxes when you sell the stock.
A counselor can also help you determine when it’s most beneficial to exercise stock options and whether to do so with cash or trade stock you already own. Using appreciated stock to exercise options may be better than using cash, because you reduce your taxable gain on the existing shares, notes Mr. Dorf.
“I estimate that 75 percent of the executives I know do not know what they earn from year to year because it’s coming from so many sources,” Mr. Dorf says. “They could be smarter about it.”
4. LEARN ABOUT SPECIAL COMMISSIONS OR AWARDS
Many employers pay one-time bonuses to employees who bring in new business or refer candidates for hard-to-fill company jobs.
After taking a break from the work force, Deirdre Carey joined Kel & Partners, a Westborough, Mass., marketing-services company, as director of client services last year, accepting a salary that was lower than her prior pay. After her employer offered all employees a 15 percent commission for landing new clients, Ms. Carey brought in a $10,000-a-month account, garnering a $1,500-a-month salary increase for 12 months, or $18,000 total. “I’m already starting to work on some other new business,” she says.
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