Salary Negotiations

Salary Negotiations

Top 3 rules for salary negotiating

Successful negotiation is based on preparation and patience. Always anticipate what you may need to know when you next speak with any potential employer.

1. Research your value. Research the value of your talent in the employment marketplace. Find sources that tell you what companies pay for the job you’re considering. The sources should take into account the size of the company you work for and its industry and region. It is even more helpful if you can use a source that helps you calculate the potential value of your personal skills and background such as education, length of experience, certifications, and management responsibility.
2. Don’t be the first to disclose a number. If possible, try to get the employer to disclose the pay for the job before you tell your requirements. If you find this too difficult or awkward, consider providing a broad range (based on the research you did above) and say you expect “a fair total pay package for the job and my unique set of skills, including….” It is also fair to ask the employer what the market data says the job is worth.
3. Prepare a counteroffer. About half of all jobseekers accept the first offer that’s put on the table, but most employers make offers expecting candidates to counteroffer – so go ahead, ask for what you want. Remember that your counteroffer can include more than just base pay; it can include bonuses, stock options, vacation time, and a flexible working schedule. Every time you speak with a potential employer, you should be prepared with a complete, prioritized summary of your ideal offer, and you should know in your mind how negotiable you are on each item.

Common Mistakes

What are the three biggest mistakes made by jobseekers when negotiating compensation?

1. Accepting the first salary offer. Because employers anticipate a counteroffer, many include room for negotiation in their first offer. This is truer for jobs at a higher level or higher salary. If you accept the first offer, you may be leaving money on the table. This could be compounded as future bonuses, salary increases, and insurance coverage are often based on the base salary level. Regardless of whether the employer has room to increase the salary offer, you should be comfortable asking. But be careful: don’t make demands or issue ultimatums unless you really are willing to walk away from the existing offer.
2. Not being prepared with relevant information. Too many people rely on the potential employer to determine the fair compensation for the job. Spending a little time learning how the relevant labor market values a particular job and how your unique skills may further increase those values can have a dramatic impact on your ability to maximize your total compensation. Knowing the facts and being able to speak intelligently about them can support and justify your desired pay.
3. Neglecting to negotiate things beyond base pay. Base salary is just one of the negotiation points. There are many more items to consider when negotiating your initial employment package, such as variable pay, performance expectations, benefits, perquisites, schedule for salary increase, and minimum severance. Once the salary negotiation is complete, moving on to the other components of total pay can be rewarding.

Discussing Salary

Some companies will ask for salary requirements in a cover letter. Some will actually ask you to accept the offer before they even mention the word salary. There is no routine, no schedule for when companies will discuss salary with you. There is, however, an ideal.
It is to your best advantage to hold off on discussing salary until after you have been offered the position. Wait for them to bring it up, and try not to be the first to mention a range. Of course, the process rarely works this way. It is a little messier, a little more random, so you need to be prepared with information on how to handle every situation.
If you are asked to name your salary requirement in a cover letter or résumé, do so. It may be the criteria used to weed out overqualified candidates. If you do not include the information at all, your résumé will be quickly set aside because you didn’t follow directions. Put down a reasonable range – such as $55,000 to $65,000-depending upon the responsibilities of the position.
If your interviewer brings up salary before you are prepared to discuss it, try to sidestep the question. Say something along the lines of, “Actually, I’d like to know more about the position before I can give you that answer.” Then ask a question about the job’s responsibilities.
Once you have been offered the position, and it is time to discuss the salary, you want them to name a figure first. This prevents you from naming a sum lower than they had been willing to pay, or a sum that is too high.

• Ask what the typical range is for others in the company with that position.
• Ask what they had budgeted for that job.
• Say you will consider any reasonable offer.
• Say that they are better informed to determine how much you are worth to the company than yourself.

All of these statements turn the situation around politely. It puts them in the position of naming a range first. If they counter, simply move on to the next statement. More than likely, they will return the question back to you no more than three times before they state a salary range.
Explaining your Previous Salary
It is probable that you will be asked your salary history at some point. If you were underpaid in your previous position, you may not want to reveal this information. Employers may base their offer on what you were previously making, or on the flip side, assume they can’t afford you. You want the employer to base their offer on your value, not your previous salary.

• Let the interviewer ask you about salary. Be prepared to answer the question.
• Do not lie about your salary history. They can verify this information.
• If you do not wish to tell your salary history, answer with the salary range you are willing to negotiate within. If it is a reasonable range, they will more than likely drop the question of salary history.
• Do not become defensive or refuse to answer the question. It will leave a bad impression and only make the interviewer more interested in your salary history and possibly less interested in you.
• Talk about how your salary increased over time, how you received off-cycle adjustments, or bonuses.

What if you named a figure too early?
You messed up and named a figure too early. After some research, you found out that you deserve more, and they were probably expecting to pay more. The time has come for negotiation. Now what? How do you go back and ask for more when you have already named a figure?

• Explain that you didn’t realize the full responsibilities of the job. Now that you have more information about the level of the position and what it entails, that sum is no longer relevant. Then state the salary you think you deserve.
• Explain that you have done more market research, cost of living research, and researched salaries in similar positions, and have readjusted the salary figure accordingly.

Remember that it was your mistake. You did say you would accept that salary, so you need to be willing to compromise. Rather than refusing the offer, ask if you could have a review and salary increase after three months rather than six. Ask if you can have a higher percentage raise increase the first year to make up the difference. Ask for a signing bonus. You should decide beforehand whether you are willing to accept the sum you stated before you did your research, or whether you want to walk away and apply your newfound knowledge the next time.
If a jobseeker has been earning $30,000 and the position they’re applying for typically pays $48,000, what can the candidate do to avoid being low-balled by the employer?

• Be sure you’re qualified for the new position. A dramatic difference in pay like this (60 percent increase) may actually indicate a promotion or perhaps a position that is significantly more demanding than your current role. Whether or not it’s a significant change, and whether or not you are qualified for the new job, you should be prepared to answer the question.
• Determine the differences, if any, between the content of the current job and the new job. Knowing the differences between the jobs will help to explain why the pay packages are different. It will also help to demonstrate that you have the skills to meet the challenges of the new position. For instance, if you are moving from a non-profit or government organization to a large corporation, you will most likely be able to increase your pay significantly.
• Determine all the differences in the total rewards packages including pay, schedule, benefits, and intangibles. There may be differences other than just the base pay—this is particularly likely if there’s a vast difference in the base pay but not a major difference in the job responsibilities. You may find differences in bonus opportunity, profit sharing, stock options, benefit plans, and vacation time.
• Reconcile the real differences between the jobs. Create a side-by-side summary of the individual job responsibilities, qualifications, compensation, benefits, intangibles, etc. Add an extra column to summarize the magnitude of the differences. Note the key differences in each category for use in negotiations.
• Focus salary discussions on the market data for the new job (rather than your current pay at your current job). Your current pay is not really relevant if the market data for the job establishes a reasonable pay of $48,000 and your skills and experience demonstrate you’re a fit for the job. Of course you shouldn’t tell a potential employer that the information is not relevant, but you can lead them to that conclusion by focusing on the much more relevant market data and value of the job in question and your value as an employee with a set of skills that qualify you for that job.
• Avoid disclosing your current salary if possible. If the potential employer does not know your current salary is $30,000, there is no problem. If asked what your current salary is, you can try to deflect the question by responding with something like, “I’d expect to be paid reasonably for someone with my skills such as [name a few] working in this job. Based on what I’ve seen, it seems that would be between $46,000 and $53,000.”
• Keep discussions focused on the new job, the salary for that job, and you in that job. (Leave the past in the past.) Being underpaid at your current job doesn’t give your new employer license to underpay you as well. It does, however, give you a justifiable reason to look for a new job.
• If your current salary is known, use the three to five most compelling differences to justify why you deserve the $48,000. Don’t try to overwhelm a potential employer with an impressive litany of differences between the two jobs that justifies the pay differential. Selectively choose three to five of the major reasons. Including a lot of the minor differences will simply dilute the impact of the major ones.
• If possible, use other current salary offers to justify what you are worth and to mitigate the effect of your current pay. If the employer thinks your current salary is relevant, you can bring in salaries from other current job offers. These have the added effect of implying a value for you in the job as well as the fact that you are a desirable employee for this type of job. (Of course, this cannot work with the first new offer.)
• If you have a lot of nerve, try to justify why you deserve $50,000 to $55,000. The job typically pays $48,000—perhaps you’re better than typical. If the employer sees that, then you should be worth more than $48,000. Go for it!