10 Things You Must Know About Salary Negations
Lesson 24 Module 7
Introduction
Studies have shown that over a 40-50 year career, people who negotiate their salary vs. settling for whatever is offered can expect to earn from $1 to $1.5 million more in total compensation. This is due to the compounding effect of salary raises over this time period. Research shows that men who negotiate earn a little over 4% more than those who don’t. For women this figure is just under 3%.
The Numbers Don’t Lie
Don’t believe it? Do the math yourself, and you’ll likely be surprised at what you discover. I did some quick calculations myself using these assumptions:
- A base salary of $50,000
- Annual raises of 2.5% for non-negotiators and 6.5% for someone who negotiates (the 4% difference mentioned above) and
- A career span of 40 years.
Using the numbers in my example, the person who negotiated their salary was paid an additional $486,551 during their 40 year career and the negotiator’s base salary at the end of their 40 year career was over $600,000 vs. about $134,000 for the non-negotiator.
The compensation you negotiate today will have tremendous impact on what you are earning tomorrow and beyond. If you want to be paid well, you have to learn the skill of salary negotiation.
Salary Negotiation Strategies
Your salary negotiation strategy will likely be different, depending on the reason for the increase and your personal circumstances. Some of these different reasons that will dictate your strategy include: merit increase, promotion, new job same employer, new job with new employer, changing industries, changing occupation, and/or seeking a lateral transfer to gain new and different experience.
Your personal circumstance will also play a role in how you approach negotiations. For example: if you’re out of work a long time or out of work a short time, currently employed, facing downsizing, really motivated to quit your current job, not looking to change but have been contacted to consider a compelling opportunity, etc.
Likely, you’ll find yourself in some combination of reasons and circumstances. It would be impossible to do justice to these many combinations, so let’s look at some of the top tips and techniques that you can use to negotiate a higher salary and then apply those that fit your circumstances.
10 Negotiation Tips You Must Master
Use our online salary tools in a following lesson to see what the average high and low salaries are for jobs that fit your experience. Remember to factor in whether you’re changing industries and cost-of-living geographical differences. If you're relocating you'll need to use the links to the cost-of-living calculators in a following lesson.
Keep in mind that almost every employer will have done their research using the same or similar sources. You have to be at least as prepared as they are.
Use job boards and other Internet resources to establish the demand level for jobs you are seeking or comparing. If more jobs are available than qualified candidates, you can be more aggressive in your salary negotiations, if there are more candidates than jobs, expect employers to be less willing to negotiate. It's a factor of supply vs. demand.
Have a minimum salary in mind before beginning negotiations. Likewise, you should also have an aggressive (high) salary target in mind and ready to use in tip #7 below.
Develop a total compensation plan that will include potential bonuses, commissions, stock, etc.
Use the Salary and cost-of-living calculators to help you arrive at your minimum and maximum salary numbers.
This is done by gaining insight into the employer’s critical needs for the job. Be sure your resume and your interview answers are accomplishment based and tie directly to the employer’s most critical needs. A generic resume and “canned” interview answers won’t accomplish what is required.
Be sure and use the information in a prior module: Asking for the Job: A Power Follow-up.
Don’t be penny foolish and turn down a reasonable offer if the job provides outstanding long-term potential. Opportunities with compelling learning experiences can quickly lead to increasing your market value because there is stronger future compensation value in this type of job opportunity.
This can be a trap, but employers expect some answer and how vague they allow you to be will vary. Current research now shows that the past strategy of letting the other side throw out the first number is not the best one.
Just the opposite is true.
Professor Galinsky of Northwestern University says their studies on negotiation strategies and tactics found that when the seller (job candidate) makes the first offer, the final price (salary) tends to be higher than if you let the buyer (employer) make the first offer.
Employers make also ask the question this way, "what is your current salary?"
NOTE: An increasing number of state and local governments, such as in Massachusetts, Hawaii, and New York City, have adopted laws that ban employers from requesting salary history information from job applicants. Research this as the number of states may have changed! If it's illegal in the state you're seeking employment and you're asked anyway, you can say, "since it's illegal here in (state) to ask, let me just say (now add the suggested answer below).
Building on the above strategy, and regardless of which question is used, just deflect and give an answer similar to this...
“Based on my research and discussions with other employers, they have been discussing a salary around (state your aggressive salary target as mentioned in tip #3 above), how does that fit with your compensation target for this position?”
Notice, how your answer ends with a question. Many times the other person will be taken off guard a little bit by turning the tables and asking them a question.
Avoid giving a range of “between x and y” because the word “between” almost always leads to the other party gravitating toward the lower number.
Note the above answer emphasizes 'your research' AND 'other employers' AND uses the word 'around' which somewhat implies a salary range, yet it isn't AND the ONLY number given was the higher number!
Whatever you do, always be truthful about your salary.
Be sure you understand the other person’s comments, position, rationale and questions. When in doubt ask a question to clarify them. Only then provide your response. This will give you a little more time to think as well.
Never take salary negotiations personally. This is hard to do, but experience has proven that the opposite approach rarely wins. Don’t be afraid to say no and walk away. Of course if you are really in need of a job, you may not have this luxury.
Remember you are taking part in what is essentially a sale and negotiation process and you can expect to get objections and push back. Figure out what the most likely objections or concerns that you’re most likely to hear beforehand and have a well thought-out response ready. It’s best to practice your responses out loud to hone them to perfection.
Now go negotiate that salary you deserve!
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