‘Six out of ten job applicants fail to negotiate their compensation package. Unbelievable isn’t it? That’s a lot of money left on the table. What’s even more unbelievable is that companies respect those who negotiate. Strong salary negotiation skills are a highly sought-after trait for most employees.
The likelihood that you’ll ever see another pay raise at your company, similar to the one you can obtain upon being hired, is small. Most pay raises, unless there is a promotion involved, hover around 2.5%. To give you say 5%, means you are taking away 2.5% from someone else. At least that’s the way they’ll explain it to you.
However, it’s common for a new hire to get an additional 10% if they dare to negotiate salary. You’ve got one shot and now is your time to take it.
A point of clarification before we get started. We often talk about negotiating salary, but if done correctly, you’re negotiating the entire compensation package. We’ll talk about what’s in a compensation package a bit later, but according to a recent LinkedIn survey of 345,000 professionals, compensation is a candidates’ top criteria when considering a job.”
Understanding how to negotiate your total compensation package is a life skill you need to learn. Why? Because on average, each employee in the U.S. will have 12 jobs before they retire. You’re going to get a lot of opportunities to negotiate compensation and thereby improve your quality of life.
Although compensation negotiation requires courage, you can gain that courage if you;
- Arm yourself with the strategies below
- Practice before you negotiate
It’s that simple.
The four phases of negotiating salary and compensation
It would be nice if the four phases of the negotiation process always occurred in a specific order. Unfortunately, that’s not always the way it goes. I’ve organized the phases here in the order in which they typically happen. However, you need to be ready for anything.
For example, although it’s common to hold compensation negotiations after you receive an offer, you might get asked by a recruiter during your first exploratory call, “What salary are you looking for?”
Or, you might want to take the bull by the horns and mention your desired salary or salary range before you interview. More about this later.
But for now, and to help you make sense of all this, I’ve organized the phases of the process in this order.
Understand the position
Knowing what you’re getting yourself into can prevent a lot of misunderstanding later that can lead to discontent and a miserable experience. That might even be the reason why you’re reading this now.
There are a couple of ways you can truly understand the position, but it all starts with the company’s position description. It should give you an idea of the major responsibilities.
The other ways to learn more about the position specifics is to ask the hiring manager or recruiter. But, be prepared. They expect you to have read the position description. Instead, ask for clarification about the position description.
Questions such as;
“What are the major challenges as you see them?”
“What do you see as the major opportunities for growth?”
“How would you describe the company culture?”
And, if the job doesn’t seem like a good fit, be polite, explain why it won’t work, and thank them for their time.
Don’t pursue the job because you feel you need to, make sure you want it.
Nearly every article you’ll read about negotiating salary will tell you to conduct salary research. It is the most important thing you can do, and the first step before any numbers are discussed between you and the company.
You must know the salary range and average salary for someone with your experience and qualifications, to effectively negotiate the salary component of your compensation package.
Although a company may not agree with your findings, as they often conduct salary research in a slightly different way using benchmarks, they’ll respect that you’ve done your homework.
Most companies engage research firms who specialize in their particular industry, so their information is likely to be more reflective of their industry’s labor market than yours. The companies I’ve worked for, including one that I ran, did this compensation research annually for all of our company positions including my position.
So, how do you do your homework? It’s easy, follow these four steps and document what you find onto a “one-page salary summary.”
Step 1: Use several of these free online salary calculators, look up the salary range, and estimate where (based on your experience and qualifications) you fall within that range. The tools will assist with that. Note the average salary and where you believe you compare to that.
Step 2: Go to the Bureau of Labor and Statistics website and find your occupation amongst the 800 listed.
Step 3: Combine the BLS information you have found with your online salary calculator findings.
Step 4: Write down this information, noting the sources, on your one-page salary summary. You’ll now have this at the ready when you negotiate your compensation package.
Desired salary and walk-away salary
Establish your desired salary and your “walk-away” salary. You may want to walk away from the negotiation if you can’t get your walk-away salary. “What you say, I might want to walk away if I don’t get my “walk-away offer?”
That’s right, and what I’m about to say next is critical to your understanding of salary negotiation. It’s not about salary negotiation. Not entirely.
If you can negotiate some other part of the compensation package to your satisfaction, your “walk away” number should be negotiable.
We’ll talk about the individual elements of a negotiation package a bit further down, but let me ask you this? “Would you be willing to accept a slightly lower salary, maybe one a bit under your “walk-away,” for a great work at home option, more time off, or tuition reimbursement?” My guess is you might.
All of the compensation elements we’ll talk about later serve as negotiating chips, especially if negotiations stall. It’s these elements that create the give and take that’s necessary for a healthy negotiation.
I recommend you list the other compensation elements on the back your one-page salary summary and rank them by their relative importance to you. That way, you’ll be able to insert them into the negotiation when needed.
Warning, don’t consider these items as a laundry list of things you have to have. If you do that, all you have is a “demands list.” The company will not appreciate being held hostage and may rescind the offer.
In the negotiation process, there’ll undoubtedly come a time when you have to defend your request. Be prepared by doing these things in advance.
- Review your resume and find the five most amazing things you’ve done.
- Copy and paste them onto the back of your salary summary one-pager.
- List them in order of amazingness.
- And last, and this is important, based on what you’ve done, list what you can do for your new company.
- Better yet, if you can estimate the magnitude of your future achievements, what we call return on investment (ROI), then do so.
It’s critical that you take notes during your discussions. There are a couple of reasons for this.
When you find agreement on individual elements of the compensation package, note what is agreed upon. This will allow you to see when you’ve achieved enough of your desires to say, “I think we have a deal.”
By demonstrating your organizational skills here, the hiring manager, or whomever at the company is interviewing you, will see that you have your stuff together.
On that note, it’s ok to treat the entire compensation negotiation as multi-tasking event, going back and forth as necessary, making trades where possible. If you get stuck on salary, move to PTO. If you get stuck there, ask about work from home options.
When you do reach an agreement, write down the specifics. Then, ask for a written offer to compare with your notes.
Elements of a typical compensation package
As you can see below, there’s a lot more to the compensation package than just salary. These are some of the common benefits that a company might offer.
- Signing bonuses
- Paid time off (PTO)
- Early salary reviews
- 401K matching
- Defined benefit plans (although losing popularity)
- Health and dental care insurance
- Disability and Life Insurance
- Performance bonuses
- Tuition reimbursement
- Training & professional development
- Stock or stock options
- Paying for professional memberships and certifications
- Concierge service
- Health + fitness:
- Remote working options
- Electronic equipment (e.g. phone, laptop, etc.)
What to do if asked one of these two dreaded questions
“What did you make (or are you making) now?” or “What salary are you looking for?”
Everyone fears these salary history or desired salary questions. According to US News.com; “This popular interview question has earned some pushback in recent years, with some advocates saying it exacerbates pay inequality.” Also, they point out that Massachusetts law prohibits asking questions about salary history.
There is no absolute best strategy as to when you should present your desired salary information but disclosing past salary information is a “no-no”.
There are two schools of thought.
- Tell them your desired salary up front and get it out of the way. There are two dangers here.
- First, you may undershoot what they were willing to pay and unfortunately get what you ask for.
- They may walk away before telling you that there were some other elements of the compensation package you’d have died to get.
- Hold off a bit.
- I believe this is the way to go unless you know what they’re willing to pay (and most likely you don’t).
- By doing this, they may mention the salary number first.
There are a variety of responses to these and related questions depending on your desires. Here are a few. You’ll need to decide which is best for you.
Find their range
“I don’t disclose information about past compensation, but I’m interested in knowing the range you’ve established for this position.”
Get your salary range out in the open
“I don’t disclose information about past compensation, but according to my research, experience, and accomplishments, I ‘m looking for compensation in the $X to $Y range.”
Keep your salary range hidden for a while
“I don’t disclose information about past compensation. Reaching agreement is more about the entire compensation package being offered, not just salary alone.
Take control of the negotiation
“I’m looking for a starting salary of $90,000.”
Remember, they may walk away when other elements of the compensation package could create a deal you’d accept. I recommend an alternative approach
Take control but leave some wiggle room
“I’m looking for a salary of $90,000 but would need to know the totality of the compensation package before making the salary firm.”
This allows you to adjust both up and down if necessary. The key is not to lock in the salary until you lock in the entire compensation package.
You’ve to practice this even if you’ve done it before. I can’t emphasize this enough. By doing so you will gain the courage to do this in real life.
Ask you’re significant other to ask you the questions you’re sure you’ll get. Give him or her the some of the compensation package elements you’d like to negotiate and practice making trades.
Practice the questions you’ll ask and the way you’ll ask them.
The offer phase
Be positive, even enthusiast
If you’ve gotten this far, the chances are good that given the right offer, you’ll take the job.
So, as you begin to negotiate the offer, you should be humble, polite, gracious, and share your excitement with the hiring manager.
You don’t want to be a Dr. Jekyll/Mr. Hyde personality when you begin to negotiate. You need to be the person they loved in the interview.
At this point it won’t weaken your negotiating position by saying something like;
“I’m really excited about working here and I look forward to reviewing your offer. I’m hopeful we can reach a deal and I can start on the first of the month, I will get back to you by late tomorrow.”
Should you negotiate salary by phone, in person or by email?
Salary negotiation is best-done either face to face or over the phone. It is much harder for the person on the other side of the table or the phone to say no. Negotiating a compensation package is complex and doing it by email could require a lot of back and forth.
Key things to keep in mind when negotiating salary
- Likeability is important. They like you, or they wouldn’t have made you an offer. It’s your job to preserve likeability as you negotiate.
- Listen hard. Make sure you understand their point of view. Never interrupt.
- Know what you want and use all elements of the compensation package to strike a “win-win” deal.
- Be clear that with the right offer, you are theirs.
- Be honest. They may ask some tough questions. Pause to reflect on the intent behind the question and politely respond.
- Don’t haggle to haggle. You want to reach a deal that both parties can embrace.
- Don’t ever create ultimatums. They’ll likely rescind their offer.
Don’t accept the first offer, that’s not compensation negotiation
When they make you an offer, that starts the negotiation. It doesn’t end the negotiation. You decide when to respond with a counteroffer. If you need a day or two to consider the offer, ask for it. This is customary and shouldn’t be a problem.
If you expect multiple offers, you need to attempt to time the process so you can have all offers in hand before you make a decision. This can be tough. Ask for additional time as necessary, but try to do this without revealing that you’ve multiple offers.
If the first offer isn’t in writing, ask for it. If the hiring manager or HR balks, and they likely won’t, tell them you want to make sure there are no misunderstandings before you respond.
It’s often as easy as saying this!
Believe it or not, negotiating salary can sometimes be as easy as saying;
“I’m ok with the compensatioin package with the exception of the salary. Do you think you could go a little higher?”
Then wait. People hate conversational vacuums.
A few things to keep in mind;
- They have made you an offer; they want you.
- They likely have a range and budget variance built in, there is usually flexibility.
- This is your one shot to get a salary bump that will probably equate to four or five annual salary increases. It’s worth saying, “Can you do a little better?”
And what do you say if they say no? You’ve at least four options.
- Option 1: You can explain why you feel that the salary you are asking for is appropriate given what you’ve done in the past and what you are going to do for them in the future.
- Option 2: You can say you understand, but would like to discuss other elements of the compensation package to compensate for their inability to go with a higher salary.
- Option 3: You can tell them ok, you’ll need some additional time to consider. They may come back with a higher salary during the wait time, or when you speak again, you can give it one last shot.
- Option 4: You can explain unless there is some flexibility in the package, you’ll need to pass. Thank them politely and walk away.
Things to say and not say when negotiating salary:
I find it is useful to practice with variations of phrases that keep the negotiation positive and constructive. I also find it helpful to know what you’d never want to say.
What to say
When you’ve evaluated the offer
Option 1: “Thanks very much for the offer. I’m very excited about the opportunit, but have a couple of question. First, I would like to discuss the salary. It is a bit lower than I had expected. Based on my research, the range for this position given my qualificcations and experience is between $90,000 to $110,000. Your offer is lower than this. Can you do better or can we find other areas of the compensation package where we migh make up for this?
Option 2: “I’m very excited about the position. I’m also excited thrilled that you’ve made an offer. I know that I will be a valuable asset to your team, and based on my experience, accomplishments, and the salary research I have done, I was wondering if we could discuss a slightly higher salary, say, $95,000?”
When you fail to get the salary number you desire
“Well, thanks for letting me know. I’m really excited about the opportunity and I hear what you are saying about the budget. But, I think I’m perfect for this role and want to find a way to make it work. I assume you want the same thing? (Wait for response). Do you think it would be possible to offer a sign-on bonus and an early salary review?”
To get to their range
“Can you tell me what the offer might contain? I’d hate for everyone to spend lot of time before we’ve established what it might take to make this happen.”
What not to say
According to Glassdoor, there are some general rules when it comes to what not to say.
- Never disclose what you are currently making
- Never tell them your desired salary (let them make you an offer)
- Don’t apologize
- Avoid “No” and other negative words.
- Don’t say Yes to early. Formulate a counteroffer and negotiate.
- Don’t assume items not negotiated can be solved later.
- Avoid using the word “try” or accept it as a response to your request.
- Don’t use the word, “more,” be specific.
- Don’t say, “I want….” Instead, prove why you deserve what you are asking for.
A note about gender
Women For Hire published some insightful information in their article, “Negotiating Salary 101: Tactics for Better Compensation | Women For Hire”
Their research indicates that the biggest mistakes some women make when negotiating compensation are;
- Women tend to be more indirect than men when negotiating compensation
- They often set lower goals and are satisfied with less
- Women can seem over eager prior to the start of negotiations
- Women tend not to recognize the opportunity to negotiate
- Women’s skill at developing relationships and preserving them can be a weakness in negotiation
- Women have been told to shy away from bold behavior
- Women, like all genders, can fail to do their homework (salary research)
- Women may not focus on the value they bring to the job
- Women can take negotiations personally
The post-salary and compensation negotiation phase
Get it in writing
There is a saying in the medical community. “If it wasn’t written down, it didn’t happen. Once you reach an agreement, ask the company to send you a revised offer. Make sure that both parties sign it.
Congratulations! With a little practice, you’ll be prepared to negotiate your salary and compensation package. Negotiating salary and compensation isn’t easy but you are now a member of the 39% of new hires who negotiate and prevent leaving money on the table. Because you’ve considered the entire compensation package, you may have even scored some extra vacation time, a signing bonus and maybe even equity in the company.
Just remember that you should always negotiate the offer a company makes. They’ll have greater respect for you if you do it in a manner which allows both parties to reach a “win-win” solution. And also remember this, all they can say is no. More than likely, there is for more wiggle room on many elements of the compensation package than you assume. What do you’ve to lose?
Take care till next week,
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