Gross vs Net pay when arguing for salary increase.

rubberduck · 2 Oct 2020 at 21:36

Just after some opinions

When determining if you are due a salary increment, is it acceptable to use net pay as opposed to gross pay. Assuming your pay is broadly the same and you haven't changed tax codes, no additional salary sacrifice etc.

Reason I ask is if I inflation adjust my gross pay over the past 3 years it may have gone up by 1%, but if I inflation adjust my net pay it has gone down by 1% (numbers entirely made up but hopefully you get the idea).

Given my job is quite dependent on experience, I think being worse off in terms of actual take home (net) is grounds for a salary increment, even if I may have seen a small increase in gross (both inflation adjusted).

m@rty · 2 Oct 2020 at 22:38

I doubt it as everyone has different deductions from their salary whether it be salary sacrifice, taxable benefits, pension contributions, student loan etc. therefore most businesses won’t care about your net pay and I would imagine won’t base any negotiations on it due to the variables.

dowie · 2 Oct 2020 at 23:07

You generally ask re: gross pay as above. Probs better to cite more than just inflation when arguing for a pay rise, no reason why you should restrict your ask to gross pay + inflation... if you want more then ask for more and give better justification for it - like performance over the past year, goals achieved, times where you've gone above and beyond in your role, current market rates, increased experience or new skills you can now bring to the table etc..

Jim_76 · 2 Oct 2020 at 23:10

dowie said:
You generally ask re: gross pay as above. Probs better to cite more than just inflation when arguing for a pay rise, no reason why you should restrict your ask to gross pay + inflation... if you want more then ask for more and give better justification for it - like performance over the past year, goals achieved, times where you've gone above and beyond in your role, current market rates, increased experience or new skills you can now bring to the table etc..

Exactly this. They won't have any real interest in negotiating based on net/gross pay. Justifying your value will give you a far better chance.

rubberduck · 2 Oct 2020 at 23:46

dowie said:
You generally ask re: gross pay as above. .

But why? Can you understand that you may have had an averaged gross that is above inflation % but your net is below? The argument will be that your gross salary has increased as a % that is above inflation -i.e. you have technically increased your inflation adjusted salary... But when you crunch the numbers and work out your take home pay it has fallen from what you used to earn 3 years ago in real terms.

Do you get my point?

rubberduck · 2 Oct 2020 at 23:48

m@rty said:
I doubt it as everyone has different deductions from their salary whether it be salary sacrifice, taxable benefits, pension contributions, student loan etc. therefore most businesses won’t care about your net pay and I would imagine won’t base any negotiations on it due to the variables.

I specifically said in my OP to ignore these variables.

m@rty · 3 Oct 2020 at 10:07

rubberduck said:
I specifically said in my OP to ignore these variables.

Salty. Ok lets put it a different way, your company won’t care about your attempt to negotiate a pay rise based on inflation factors only and will most likely tell you to jog on.

Either come up with a better approach such as comparing your salary against the going market rate for your role (remember that’s gross salary old chap, due to the variables

) or as stated above, base your approach on how your value to the company has increased since your last review, for instance due to you gaining new skills and/or more experience.

HACO · 3 Oct 2020 at 10:55

rubberduck said:
But why? Can you understand that you may have had an averaged gross that is above inflation % but your net is below? The argument will be that your gross salary has increased as a % that is above inflation -i.e. you have technically increased your inflation adjusted salary... But when you crunch the numbers and work out your take home pay it has fallen from what you used to earn 3 years ago in real terms.

Do you get my point?

I get your point about gross vs. net and inflation. The point is, inflation is irrelevant to your employer and they don't care.

They pay you what they believe your market value is, if you want this to increase you need to make a case that your market value is higher. Your employer sees your market value by a combination of three factors:

What they believe you'll be able to get elsewhere
What they believe they have to spend on a replacement for your role
What they're willing to pay to keep you if you were to get an offer elsewhere

Inflation is not part of the equation and you should not go into the negotiations making a case about pre and post tax inflation.

You need to focus on how your productivity has increased compared to three years ago, and how you're adding a lot more value to your employer versus three years ago, and argue that your compensation needs to reflect that.

HangTime · 5 Oct 2020 at 11:41

No it's not acceptable - you can't just say "ignore these variables" because they impact what your cost to the employer is.

Imagine the flipside, the government announces a tax cut, would you be happy if your employer says "ahah your net pay has now gone up, so we are not increasing your gross pay for the next few years as your net pay is still going up by more than inflation"

HACO · 5 Oct 2020 at 11:55

HangTime said:
No it's not acceptable - you can't just say "ignore these variables" because they impact what your cost to the employer is.

Imagine the flipside, the government announces a tax cut, would you be happy if your employer says "ahah your net pay has now gone up, so we are not increasing your gross pay for the next few years as your net pay is still going up by more than inflation"

To be fair companies absolutely, 100%, take that into account. If taxes go down, they will absolutely try to avoid giving raises to save on their salary costs, saying that tax cuts were effective raises. If taxes go up, well, that's the government and not the employer's fault

happy_2008 · 5 Oct 2020 at 12:01

You always use Gross, companies will not spend the time to work out the payrise in Net pay

dowie · 5 Oct 2020 at 14:52

rubberduck said:
But why? Can you understand that you may have had an averaged gross that is above inflation % but your net is below? The argument will be that your gross salary has increased as a % that is above inflation -i.e. you have technically increased your inflation adjusted salary... But when you crunch the numbers and work out your take home pay it has fallen from what you used to earn 3 years ago in real terms.

Do you get my point?

I don't think there is much of a point - don't use inflation as an argument for a salary increase in the first place tbh... The impact of this varies considerably, more of an impact higher up where you're enter say the 50k or 100k brackets, remember though these brackets get adjusted upwards too - the 50k bracket used to be more like 40k at one point etc..

The point is though that tax policy isn't an argument for a pay rise in the first place - like when people lost the tax free amount past 100k that wasn't an argument for a pay rise double the usual size etc.. your pay negotiation is based on what the employer is paying you - do you expect to give some salary back or take a pay cut if a government changes tax brackets and takes you less? There was a 50% tax rate at some point... the brief trap at 100k might be undone by a conservative chancellor (it's quite blatantly unfair but the public perception wouldn't be great if/when it happens).

Your argument for a pay rise should be based on something more tangible like what you've contributed etc.. and really you ought to be aiming for more than inflation else you're not really making any progress.

Randomface74 · 5 Oct 2020 at 14:55

Just tell them your pay rises are so small you're actually worse off in real terms. If they don't fix the situation you're going to look for a new job.

mattyg · 5 Oct 2020 at 14:56

You can ask for whatever. But your employer will look at what it costs THEM.

randomshenans · 5 Oct 2020 at 16:01

mattyg said:
You can ask for whatever. But your employer will look at what it costs THEM.

Yea, exactly this. Your take home is not something they're looking at. They look at cost to them. If you choose to leave, they'll look at cost to replace you vs. paying you some more. Won't be looking at the amount you take home though.

A2Z · 5 Oct 2020 at 17:16

Gross always.

Trying to get a rise based on net etc etc is just silly. Why would the employer care?

rubberduck · 5 Oct 2020 at 18:42

A2Z said:
Gross always.

Trying to get a rise based on net etc etc is just silly. Why would the employer care?

So if you had a £50k job in the UK you would move to Switzerland for a £60k job??? I don't think so!

randomshenans · 6 Oct 2020 at 07:41

rubberduck said:
So if you had a £50k job in the UK you would move to Switzerland for a £60k job??? I don't think so!

That's you caring about it, not an employer though. He didn't say he didn't care net, just that an employer won't.

Lopéz · 6 Oct 2020 at 20:06

rubberduck said:
So if you had a £50k job in the UK you would move to Switzerland for a £60k job??? I don't think so!

But this is your problem, not the employer's problem.

mid_gen · 8 Oct 2020 at 09:38

rubberduck said:
Just after some opinions

When determining if you are due a salary increment, is it acceptable to use net pay as opposed to gross pay. Assuming your pay is broadly the same and you haven't changed tax codes, no additional salary sacrifice etc.

This is nice and simple : no.

Any time you are trying to negotiate your salary based on anything but your value to the employer, you're just ****ing in the wind imo. I wouldn't entertain anyone coming to me with that as a line as to why they deserve a rise.

It stinks of laziness and entitlement.