Employers seem to have the better hand in pay negotiations. But here are 6 ways to better read the cards they hold.

Secret 1: Your pay doesn’t necessarily reflect performance and seniority
While fair and equitable pay may be your company’s aim, the goal post keeps shifting.

Managers will pay what the market demands to get the right candidate. So in a tight job market the starting salary of a new hire at your level may come close to or even match yours, despite your seniority and institutional knowledge.

Some companies are proactive about performing an equity analysis on a regular basis and correcting for the problem. If they discover that the gap between your pay and the newer hires isn’t wide enough, they may give you a larger bump in salary than the usual merit increase.

But many are not proactive and won’t take action unless they get a complaint from old faithful.

What you should do: Keep abreast of the going rate for people with your experience and education, especially if you were hired in a down market.

If you notice a discrepancy, said Dallas-based compensation consultant Rebecca Elkins, tell your boss, "I’m aware of this and am wondering what can be done to bring me up to market?"

(See Myth 1 to find out about surveys that can help you gauge the going rate for your position.)

Secret 2: There’s more raise where that came from
When it comes to merit increases, your boss has discretion about how much she gives you, so long as the average raise she gives doesn’t exceed a certain target, say 3.5 percent. So she might award the top performer 5 percent, but below-average employees only 2 percent.

But there might be more money available than your manager lets on.

Smart companies "always have a little something in their back pocket … to use when they need it – say to keep an employee they can’t afford to lose," said Dallas-based compensation consultant Rebecca Elkins.

Say you fit that category, and you request an 8 percent raise when the company typically has offered you 4.5 percent.

Smart managers would ask themselves, "Am I willing to lose this person for $500 a month?" Minneapolis-based compensation consultant Jim Fox said. "If they’re concerned about losing you, that extra money is minuscule, pennies compared to what it will cost to replace you."

What you should do: The day of your review is not the time to negotiate a higher raise since your manager has already gotten approval for the increase he’s budgeted. Your campaigning should start months before. "You have to sell yourself all year round. Don’t be shy about telling your manager, ‘Hey, I did this,’" Elkins said.

Secret 3: When you’re told they can’t pay you more now, budget may not be the issue
If you ask for more money and your boss says the budget is too tight now — ask him what it will take for you to reach your desired pay level, said Minneapolis-based compensation consultant Jim Fox.

If you don’t get a clear or encouraging answer, it could mean one of several things:

  • Your boss doesn’t think you’re worth that much money in your current position.
  • He doesn’t have the authority to make that decision or doesn’t want to take on the challenge of getting you up to the next pay level.
  • Or, you’re already paid at the top of the company’s scale for your position.

What you should do: Consider whether you want to continue working in that position at that company, Fox said.

Myth 1: Your pay is all about you
Thanks to a fear of lawsuits and dissension in the ranks, companies usually employ a systematic process, complete with outside paid consultants, to determine compensation.

Typically, however, companies don’t do a good job communicating to employees how they arrive at pay decisions. But they should, and if yours doesn’t, don’t be afraid to ask. "It’s only fair to say ‘can I have the basic facts,’" said Dallas-based compensation consultant Rebecca Elkins.

What you should do: Ask what salary surveys they use to assess the going rate for your position and which competitors’ pay scales they use as a point of comparison.

Salary surveys that companies use may not be available to individuals. But Salary.com now aggregates findings from a number of those surveys, updates its numbers regularly and offers both general and customized salary reports for your job based on where you live, your tenure and other specific factors. The customized reports cost between $29 and $79.

Another, more expensive option at $200 is a quick-call salary report from the Economic Research Institute, which also aggregates the findings from a number of salary surveys.

Myth 2: Bosses pay more if they like you
Bosses definitely like some employees more than others — sometimes a lot more. So it’s easy to assume your manager sweetens the pot for his faves.

That’s entirely possible, but chances are it’s not because he’s playing favorites, said Minneapolis-based compensation consultant Jim Fox. Chances are the employees he likes the most are also the ones who make his job easy and who make him look good to his managers.

Myth 3: You can’t negotiate severance
Unless you have a contract saying otherwise, companies that lay you off aren’t legally required to provide you with severance. Typically, though, they will offer something. The question is whether it’s enough given your tenure and contributions.

If you don’t think it is, you may be able to negotiate a better package if you have some points of leverage. A key one is what New York-based compensation attorney Alan Sklover calls "pipeline value." That is, are you the only person at the company familiar with important details of a current project or who knows how to perform a critical function for the employer?

In other words, do they still need something from you?

What you should do: When making your request, keep in mind, you’re negotiating with individuals, not "the company," Sklover said. And those individuals have things to lose, including their bonuses or jobs, if negotiations with you don’t go well.

The best way to make your request: Respectfully, in writing, to someone in a position to give you more severance — i.e., not HR. You might start with your manager, or your manager’s manager.

Sklover also has recommended clients send their letters directly to the board of directors if they have a legitimate claim and those lower down on the totem pole aren’t persuaded.