Be proactive at work if you want a salary rise, advises Nick Bruining.
Preparing for a performance review can help your prospects in securing the next pay rise. But remember to put it to good financial use if you succeed.
"These days most companies are looking for staff who are multiskilled and able to perform tasks in a range of areas, says Andrew Dingjan, the marketing director with Drake Australia. "If as a result of training and skills development you're more attractive to other employers, then your existing one is more likely to want to retain you."
For employees of smaller companies with a less structured review process, being proactive can increase your chances.
"Small business owners face a number of pressures these days and appreciate any extra help they can get," says George Etrelezis, the managing director of the Small Business Development Corporation.
"This doesn't necessarily mean you have to spend extra time there; just be prepared to be part of a team approach to problems and challenges within the business. Offer ideas that can make life easier for everyone and help grow the business.
"They are looking for people they can rely on and trust, willing to take on extra responsibilities. If you're seen to be part of the success, then you're more likely to be rewarded and viewed as too valuable to lose."
The review process should be used to establish how well you've performed during the year and to provide feedback on areas where you could improve. It's important not to get upset with negative feedback but to make sure that you understand where things have gone astray.
If you disagree with the comments, explain why. It's best to resolve the matter so that you don't leave the meeting festering over any misunderstandings.
Use the review to state what your ambitions are within the organisation. Also establish how you'll be judged over the next review period.
Discuss key performance indicators (KPIs). The KPI in a retail business, for example, may be based on the number of unsolicited customer compliments received or on gross profit. By setting these up at the outset, you'll be able to measure your own performance. For employers, it often promotes more consistent performance rather than spurts close to review time.
The next stage is to ensure you don't fritter away any pay rise. If retirement is a long way off, then repayment of non-tax-deductible debt is the most tax-efficient investment you can make, particularly in the current climate of rising interest rates.
Let's say your income puts you in the top tax bracket and you have a standard mortgage at 7.07 per cent a year. If you were able to find a bank deposit paying the same rate, the after-tax return amounts to 3.64 per cent.
In other words, paying off the mortgage sooner is the equivalent of you earning nearly double your mortgage rate before tax.
If you are close to retirement, salary sacrificing any pay rise to super is your best bet. It is subject to the 15 per cent contributions tax (plus surcharge for high income earners), but that is generally less than your marginal tax rate.
Even if you have a loan, it can be beneficial sticking to this strategy and to then cash out part of your super when you retire to make
any repayments.
Nick Bruining is a certified financial planner. Last week he won Money Management's Financial Planner of the Year Award.
