Is now the right time to ask for a raise?

At a time when Europe is experiencing multiple crises and inflation is setting new records, employees have more reasons than ever to ask for a raise. Would it be foolish to waste this favourable opportunity to negotiate your salary? Should employees request the highest amount possible, given that this opportunity might not arise again any time soon? While the saying “there’s no harm in asking” is still as valid as ever, the current situation makes it wise to consider the positions of both the employer and the employee.

Carrying out recruitment projects for different industries and organisations on a daily basis, we see some common concerns emerge. Namely, the shortage of employees, which has been reported extensively in recent years, is not only a concern affecting the IT sector alone, but a cross-sectoral problem that has now been coupled with salary pressure caused by the ongoing crises and boosted by inflation. While some may predict that the deepening of the current crises will lead to a wave of layoffs and, in turn, a solution to the labour shortage, we cannot concur with this prognosis. Indeed, the coming months will probably bring layoffs and an influx of jobseekers to the labour market, but Estonia still grapples with structural unemployment. This was illustrated back in 2020 when the newly broken out COVID-19 crisis saw some market segments suffer, while others thrived, demonstrating that it is not always possible to transfer people who have lost their jobs to a new field, at least not immediately and without any retraining.

Therefore, right now is not the best time for all of us to ask for a raise. The moment primarily favours those working in areas less affected by crises and/or areas where labour shortages are still an acute problem. What are some of the things that employers and employees should keep in mind in this situation?

Three recommendations for employers:

1. Be open and transparent with your employees and discuss whether increasing salary costs can go hand in hand with steps to increase revenue. Any savvy employee understands that if costs rise without a rise in revenue, the employer’s sustainable operations and their job may be in jeopardy.
2. Before giving in to salary pressure, make sure you can still keep people employed with higher wage costs. After all, the employer is responsible for having control over their revenue and expenses.
3. Whenever possible, find ways to keep good employees, don’t lay them off. Come good times, you will be faced with the challenge and additional cost of recruiting new people. Without good employees, you will be less prepared to take advantage of the next economic growth cycle.

Three recommendations for employees:

1. In addition to justifying your request for a raise with growing costs, try to think of ways to increase your contribution at work. What could be your role in ensuring that your employer is not only faced with increased costs, but also increased revenue?
2. Current circumstances force employers to tighten their belt, and the same is true for employees. Today’s collective restraint can lead to positive long-term perspectives, whether that means a sustainable employer and a permanent job or a positive economic situation and improved circumstances overall.
3. Avoid quiet quitting. Quiet quitting, or doing the bare minimum of work, can occur when a person loses their motivation and grows dissatisfied with their professional life.  This kind of behaviour can grow more common during times of crisis, first because of the higher general stress level, and secondly because finding a new job is more difficult. Yes, it may be more challenging to find a new job these days, but it is certainly not impossible, and in the end, both you and your current employer will be better off.

It is important to understand that salary expectations are a matter of personal opinion and vision, and should never be attacked or belittled. Rather, it can be useful to recognise that the pursuit of an increase in salary is driven by increased costs as well as the search for security in today’s complex world. In this situation, however, employers should acknowledge their responsibility – the responsibility to keep track of their costs and revenues, and – if there is no increase in revenues – to find solutions and alternative ways of coping with salary pressure, be it recruiting employees with less experience and lower salary costs, offering part-time work or consciously developing the efficiency and productivity of employees, so that a smaller number of employees could achieve more.

One thing is certain – from the point of view of employers, salary costs could always be lower, while from the point of view of employees, salaries are never high enough. The key to making the right choices is the ability to see and understand the situation and position of both parties. This rings even more true in the face of today’s crises. With all this, it is also worth remembering the strengths crises can forge – times like these often inspire resourcefulness and improve effectiveness, leading to a kind of market reset and paving the way for new ideas and success stories.