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September 19, 2014

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Negotiating Salary 101: Tactics for Better Compensation

Concerned about compensation? Arm yourself with data from Job Search Intelligence, which the US Department of Labor says offers the most accurate salary information available. The salary calculator gives you a personalized compensation value to take to your negotiations. Use this tool to guide the conversation to get the compensation you deserve.

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In this section:

Studies show that we women are just as good at negotiating as men – except when it comes to negotiating for ourselves. We’re outspoken when it comes to haggling for a great deal at a flea market or speaking up to raise money for our kids’ schools. Yet, when the focus is on us, we become shy, intimidated, and uncomfortable. Among the most common negative scenarios: downplaying our worth, failing to research comparable compensation, aiming to please others at our own expense, and settling for what others think we deserve instead of for what we want. We’ll address various tactics for understanding and overcoming these serious issues with the goal of empowering women to be their own best negotiators. We’ll cover asking for and responding to raises and effectively handling bonuses and performance reviews. Since women often ignore a host of benefits available to them simply because they don’t understand or value them, we’ll explain how to identify, evaluate, and negotiate perks beyond money.

What are the top three rules for jobseekers to follow to successfully negotiate the best possible compensation package?

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.

What are the biggest mistakes women make?

In a negotiation, women tend to be more indirect than men when asking for things. For example, a man might typically say, “I want more money,” whereas a woman might say, “I really have a lot of expenses because I recently bought a new house.” The implication is that more money is needed, but that’s not exactly what she’s saying. Many women will merely imply what they want, but not come out and ask for it. Women are also more likely to take “no” for an answer. They hear “no” and stop, whereas men might make a counteroffer.

Many women also set lower goals and are satisfied with less than men, but it’s not clear why. Experts often say that one theory is that women compare themselves to other women and they don’t include men when comparing salaries, benefits, or promotions. For some reason, women tend to think lower pay is fair.

Most of the mistakes women make in negotiation happen before they even enter the conversation. Before even starting a negotiation, it’s important to establish in your own mind what alternatives and trade-offs you might be willing to consider. When you feel empowered by alternatives and multiple options, you are able to eliminate the fear that often seeps into the negotiation process. Some of those viable alternatives might include:

  • Trying to generate another job offer
  • Lining up another interview
  • Taking an “I’m the buyer” approach to the negotiation

Be aware of sounding and acting too eager from the very first contact, letters, résumé, and phone calls all the way through the interviews and negotiations. Adopt the attitude that the company is lucky to get you.

Think of the type of setting you’re most comfortable in and try to have important conversations there. What environment is it easier for you to stand firm or say no in? At a negotiation part, opt for a conference room rather than your would-be supervisor’s office. That’s neutral territory.

It’s also essential to prepare specific things to say depending on the style of your negotiator. You should have a plan of attack for both. A hard-style negotiator is firm, with forbidding body language, and tends to say “no” to everything. This type of person can be very intimidating. Don’t let them rattle you. Stand your own ground too.

A soft-style negotiator is very agreeable and tries to work with you. Don’t be fooled by a soft-style negotiation front. It’s a common mistake for women to be very agreeable in return, while trying to be polite and make the negotiator like you. You can easily end up walking away with less. The bottom line is you still have to ask for what you want without feeling guilty regardless of whom you’re dealing with.

Many of the mistakes women make when it comes to negotiating have little to do with their negotiating skills, and more to do with their negotiation attitudes. Review the following list of mistakes women make and compare them with your own feelings and attitudes toward negotiation. You cannot correct your own mistakes unless you can recognize them.

  • Women tend not to recognize opportunities to negotiate. Do not make the mistake of considering all salary and benefit offers firm. It is not always a take-it-or-leave-it situation. Most employers expect you to come back with a counteroffer.
  • Women are good at building relationships. When women value a relationship, they tend to protect it. Women make the mistake of failing to negotiate out of fear of hurting the relationship they have built with their interviewer and potential employer. Do not make the mistake of thinking negotiation will anger your interviewer.
  • Society has taught women to shy away from bold behavior. Women are more likely to sit back and wait for credit for their work than to ask for compensation. Women have internalized the idea that asking for more than what someone wants to give is rude. Realize that it is ok to ask for what you deserve.
  • Women fail to do their homework. An important part of salary negotiation is researching comparable salaries in similar positions. Many women do not know their own worth. Make sure you value your own experiences and education.
  • Women focus less on what they are giving the employer than on what the employer is giving them. They already see the employer as providing so much that they are willing to settle for smaller salaries. When negotiating, focus on what you are offering an employer, not on how the position will advance your career.
  • Women start off in the hole. Women do not negotiate a higher salary to begin with, so raises and bonuses computed by percentage are smaller as well. The problem feeds off itself and the wage gap between men and women continues to grow larger. Don’t make the mistake of thinking a low salary will eventually “catch up” to what you deserve.
  • Women take negotiations personally. Remember it is about business, so detach your emotions from the conversation.

More than likely, you make at least a few of these mistakes. Chances are interviewers will have more experience and skill at salary negotiation than you. It is important to prepare a strategy.

Negotiating is not a simple process. It takes a lot of research, effort, great debating skills, and practice, but the payoff is worth the work. Never accept a job offer without discussing the salary and benefits. Go in prepared.

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!

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