The pay rise you need this year to keep up with inflation (and how to get it)
Inflation is rising at the fastest rate in a decade. Here's how much extra you need to earn based on your current salary just to have the same buying power as last year.
There's a reason everyone is talking about inflation. The current inflation rate is increasing at the fastest level in more than a decade. It will impact every single one of us as the cost of living increases and our buying power reduces.
The government predicts that inflation will reach 4.25% by the middle of the year, up from the current level of 3.5%. Unless you get a pay rise to match this, you'll effectively be getting a pay cut as your money will be worth less than it was a year ago.
This is because the cost of everyday items is going up, so unless wages go up too you'll have less buying power. Petrol prices have been one of the most noticeable, but we're also already seeing prices increase for fruit and vegetables, household essentials and energy bills.
The pay rise you need just to keep up with inflation
Whether you're planning to ask for a pay rise this year or not, it's a good idea to work out how much extra you'll need to simply break even with inflation. If you don't increase your salary by 4.25%, the expected rate of inflation for mid-2022, you're actually going backwards.
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So if you're currently earning $80,000 a year, you'll need a pay rise of at least $3,400 just to maintain your current level of buying power. If you're earning more at $120,000, you'll need to get a bigger raise of $5,100 to break even.
If you're planning to ask for a pay rise, consider the inflation rate the minimum to simply break even and any additional amount on top of that to be your raise.
Tips to getting a pay rise this year
Here are some tips to help you secure a pay rise in 2022.
- Know the numbers. Come prepared with the increase you need to keep up with inflation based on your income. Some companies may do a standard annual salary increase of, say, 2%, but this is lower than the current inflation rate. Do your research and be confident with the number you're asking for.
- Look at similar roles. It's definitely an employee's market at the moment, with lots of open roles available and companies struggling to fill them. Find out what salary other companies are offering for similar roles to yours. Ask around and look at sites like LinkedIn and Seek. It will help you make your case if you can prove that other companies are paying more.
- Tell your manager before your review. Instead of waiting until you have your annual review and surprising your manager with a pay rise request, let them know in the weeks beforehand that it's something you'd like to discuss. This will help plant the seed and give them time to do their own research and planning before your meeting.
- Come prepared with examples. If you're doing work that's above your current pay grade, come prepared with examples of this. Similarly, if you've worked on things that have helped your company increase its revenue, get more customers, increase downloads or whatever metric you're trying to achieve, bring proof of this too.