How to Write a Compensation Proposal

A compensation proposal is a letter addressed to an employer seeking a new or improved rate of pay. It can serve as the first step in negotiating a higher salary. Letters often work better than asking your boss in person because it gives him or her time to process the request without being put on the spot. Though writing a letter may seem less stressful than having a meeting, you will still have to conduct research and present it in a formal way to improve your chances of having a successful negotiation.

Part 1

Part 1 of 2:

Gathering Information

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1
Know your exact financial status at your job. This seems obvious, but the first step is knowing exactly how much money you make. Also make note of the last time you received a pay increase. You can then compare this information to the other data you'll find as you further investigate your field.^{[1]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source}
- If you're unaware of what your exact compensation is, collect your past pay stubs. If you don't have these, ask at the company payroll department for your financial history at the job.
2
Gather any positive feedback to bolster your argument. The key to getting a salary increase is proving that you're an asset to your company. Good performance reviews, customer feedback, or any other information that attests to your value will help your case. Keep these records close at hand so you can cite them when you write your proposal.^{[2]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source}
- Not all companies do regular performance reviews. In this case, there are a few things you could do to gather information to help your case. For example, if you have team or planning meetings for your area or department, then these could be good opportunities to check in with your boss and assess your performance on a regular basis.
- You could periodically schedule a meeting with your boss and ask how you're doing at your job. Make note of the feedback you receive. If your boss says you're doing a great job, use this as your positive feedback. If your boss tells you a few things you could improve upon, take that feedback seriously and work on those areas. Then when you write your letter, you can say how you've taken your boss's advice and improved.
- If you have a direct supervisor who's not your boss, see if he or she will give you some feedback. If you get good feedback, you can ask your supervisor to write a letter to your boss about your good performance.
- You may also consider looking for a mentor at work. If your company has a mentorship program, then indicate your interest to your supervisor. Or, if there is not mentorship program, then try talking with a more experienced, successful employee and see if they would be willing to be your mentor.
- Take all feedback you receive without getting defensive. If you get some negative feedback, don't argue. Instead, take the advice and use it when you write your letter. You can demonstrate that you've taken feedback to heart and improved your performance.^{[3]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source} Keep in mind that businesses are results-driven, so it is important to put your emotions aside during this process.
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3
Investigate the pay range for your job and level of experience within the industry. When asking for increased compensation, you have to be familiar with typical pay rates within the industry. This will show you whether it would be reasonable to ask for a raise or not.^{[4]XResearch source}
- Use sites like PayScale or Glassdoor to research salaries within your industry.
- For example, you might find that the average worker in your field earns between $45,000 and $50,000. If you're earning $44,000, you're below the average, and it would certainly be reasonable to ask for more money. You can use this as leverage when you write your proposal.
- If, however, you're making $52,000, you might have trouble getting an increase. You boss could counter your request by saying that you make an above-average salary.
- If you're earning above the industry average, you could still ask for a raise, but you'll need a lot of evidence that you're a true asset to the company. Financial figures would help most, because it would show your boss that he or she is making money with you around.
4
Take timing into account. Many times getting a pay increase is a matter of getting your boss at the right moment. If it's a particularly busy time of year, your boss might be overwhelmed and won't have the time to consider your request.^{[5]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source}
- Also consider the company's budget. If things have been tough for a while, your boss may not be able to give you a raise even if he wanted to. If earnings have been high, however, you can take advantage of both the availability of money and your boss' good mood by asking then.

Part 2

Part 2 of 2:

Writing Your Letter

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1
Format the letter appropriately. Remember, this is a formal business letter, and should be formatted accordingly.^{[6]XResearch source}
- Place your name, title, and address on the top left of the paper.
- Place the date below this.
- Put your boss' name, title, and address below this.
- Address your boss appropriately. Start with "Dear Mr." or "Dear Mrs."
- Have 1-inch margins around the paper and use single spacing. Don't indent, just use a double space in between paragraphs.
- End with "Sincerely," then leave 4 lines so you can manually sign your name. Below this, type your name and title.
2
Start with a cordial statement about your job satisfaction. Don't jump right into "I need more money." Ease your boss into your request by stating that you're glad to be working for this company.^{[7]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source}
- For example: Dear Mr. Smith, Please allow me to once again express my pride in working for this company. I appreciate all the opportunities this job has granted me.
3
Highlight your past accomplishments. After the introduction, then establish your value to the company. Your boss may be legitimately unaware of your specific contributions to the company. Seeing them all laid out will help him or her see that you are indeed an asset to the company.^{[8]XResearch source} Highlight all of the good work you've done to demonstrate that you deserve more money for your work.
- You will need to provide concrete evidence of your performance in the letter. Be sure to include specific details, percentages, and figures about your contributions to the company. Avoid general statements such as, “I work hard” and “I do a great job.”
- Mention how sales have increased in your department, or how customer satisfaction has gone up.
- If you have any good performance reviews, cite them here. Also be sure to include copies of them with the letter.
4
State your rate of compensation in relation to the industry standard. After establishing that you've worked hard for the company, then state your concern that you're earning less than the industry average. Again, your boss might actually be unaware of industry standards, so seeing all of the research presented may help make your point more convincing.^{[9]XResearch source}
- Include exact figures here. State exactly what you're making, and then state what the industry average is. Point out what the discrepancy is.
- If you're making above average, point out exactly why you're such an asset to the company that you deserve more.
5
Ask for a specific amount. Don't simply ask for more money, tell your boss what your expectation is. This will allow your boss to look at the numbers and see if the company can afford your request.^{[10]XResearch source}
- Write, "In line with my performance for this company, I request a compensation increase of 3% annually, which will bring my yearly salary to $50,000."
- It is often good to ask for slightly more than you actually want so if your boss negotiates with you, you'll end up closer to what you actually want. Don't go overboard, however, or you'll seem unreasonable. For example, if you want a 2% raise, ask for 2.5 or 3%, not 10%.^{[11]XResearch source}
Always end on a positive note. Don't use any kind of ultimatum, like threatening to leave if you don't get your request.^{[12]XResearch source} Stress your desire to continue working for the company and that you look forward to the future. Write that you're willing to discuss this matter with your boss any time.^{[13]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source}

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How do I ask for a raise when I pay for my own transport?
Jill Newman, CPA
Financial Advisor
Jill Newman is a Certified Public Accountant (CPA) in Ohio with over 20 years of accounting experience. She has experience working as an accountant in public accounting firms, nonprofits, and educational institutions, and has also honed her communication skills via an MA in English, writing jobs, and as a teacher. She received her CPA from the Accountancy Board of Ohio in 1994 and has a BS in Business Administration/Accounting.
Jill Newman, CPA
Financial Advisor
Expert Answer
Your compensation will still be directly related to your job and performance of your job duties, so it shouldn't matter that you pay for your own transport.
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Tips

If you are in a position where you think you deserve greater compensation but an employer has already firmly stated what they are offering in terms of salary or benefits, think of other ways in which you can be reimbursed: relocation allowances, extra time off, greater retirement benefits, financial help with educational costs, etc.
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Warnings

Writing a compensation proposal is an alternative to in-person salary negotiations and should only be done when an employer indicates that he or she is open to such a proposal. Do not send a compensation or salary proposal out of the blue or without having been previously requested to do so.
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