If you're like most people, this part of the job hunt provokes a lot of anxiety. You want to get the best compensation package you possibly can, but at the same time, you're afraid that if you ask for more than the employer initially puts on the table, the job offer might be withdrawn. You may be tempted to snap up whatever the employer offers just to avoid all those uncomfortable feelings that crop up during the negotiation process.
That's fine—as long as the employer is offering you a fair wage. Take the money and run, as they say. But if you fail to counteroffer and accept a salary or benefits package that's less than it should be, you'll hurt yourself not only financially, but emotionally. You'll soon come to resent the employer for paying substandard wages, and that anger can't help but reduce your job satisfaction. You owe it to yourself—and to the employer—to work out a deal that satisfies you both.
Yes, salary negotiation is a tricky prospect. You can indeed damage your relationship with the employer if you go about negotiations in the wrong way—maybe even to the point that the employer decides that hiring you isn't such a good idea after all. But if you follow a few basic negotiation rules and strategies, you should be able to agree on a compensation that will leave you and the employer feeling good about your new partnership.
Know Your Worth
The first key to successful salary negotiation is research. Before you discuss salary, you need to know the going rate for the job. You also must know how much employers in your area are paying people with your level of experience, education, and skill. Without this information, you have no way of knowing whether the employer is offering you a fair market price for your services.
If you don't already know the salary range for the specific position you're considering, dig up the data you need now. Don't forget to look at average salary levels for your city and state, not for the entire country.
Also determine whether the figures you see reflect salary alone or include the value of insurance plans, retirement programs, and other employee benefits. And pay attention to whether you're looking at salaries earned by men or women! Remember, in most cases, women still earn less than men doing the same job. You should request, and expect to earn, the same salary paid to a similarly qualified man.
Don’t Negotiate until an Offer Is Made
Never enter into salary negotiations until the employer makes you a firm job offer. At that point, you're in your strongest negotiating position because you know that the company has decided that you're the best candidate for the job.
If the interviewer asks you during your first meeting how much money you expect, try dodging the question. You want the employer to name a figure first, if at all possible. Why? Because otherwise, you may state a salary that's lower than what the employer is willing to pay, thereby cheating yourself out thousands of dollars a year. Or you might suggest a salary figure that's higher than what the employer had in mind, in which case the company may think it can't afford you and put your resume into the "not available" pile. Either way, you lose.
When an interviewer asks you what salary you want, you can sidestep the question saying something like:
"I need to know a little more about the job responsibilities and the level of expertise you're expecting before I can suggest an appropriate salary."
If you're pressed to name your salary expectations, don't refuse, but don't commit yourself to a specific figure. Instead, offer a salary range:
"I expect a fair market wage, of course. I believe that for this position, the going rate in this area is in the $25,000-to-$35,000 range."
Always give a fairly broad range to minimize the chances that you will be way under or way over the salary the employer has allotted for the job. The bottom figure should be the minimum you will accept.
How Much Can You Negotiate?
Some companies have rigid salary structures in place and don't allow any negotiation at all. Some establish a salary range for each position and give the hiring manager or HR director latitude to negotiate within that range. Others don't have any firm salary rules and may agree to a higher compensation package if they think the candidate is worth the extra expense.
Generally, the higher up the corporate ladder you go, the more you can bargain for added wages, benefits, and perks. Usually, employers don't negotiate salaries for entry-level, hourly positions.
Your negotiation power also is affected by the job market. If there are a lot of people on the market with your same skills and level of experience, you obviously won't have as much leverage as someone with qualifications that are hard to find. Employers know that if you don't take the job, someone else will.
However, don't assume that just because the job market is crowded or the position isn't an executive-level one that you can't negotiate at all. Remember, the employer selected you as the best applicant for the job, so you must have something the others don't.
If you ask for a higher salary or a few more benefits in the right way—and your request is reasonable—you won't risk losing the offer. You can always lower your asking price if need be. And the employer just may surprise you and agree to your request.
Make Your Best Deal Now
Your best—and sometimes only—opportunity to negotiate a higher salary is before you join a company. After you're on the job, it will be very difficult to increase your compensation substantially because any raises you receive will be based on your starting salary.
In most companies today, the average annual raise is in the neighborhood of 3 to 5 percent. Some employers won't raise your salary much more than that—even when they give you a promotion. If you work for such an employer, you'll be lucky if a promotion nets you an increase of 10 to 15 percent. You can see, then, how critical it is that you negotiate your best deal when you accept a new job.
How to Respond to a Job Offer
When an employer makes you a job offer, the first thing you need to do is determine whether the terms of the deal meet your needs or whether you need to negotiate for a higher salary or better benefits. The way you respond to the employer's initial offer can make a difference in the outcome of any later negotiations, so step lightly and carefully.
1. Express your enthusiasm.
First, tell the employer that you're pleased and excited to have been selected. Enthusiasm is catching, and you want the employer to remain enthusiastic about you during the negotiation process. Telling the employer how pleased you are about the opportunity also sets a positive climate for any subsequent negotiations.
2. Ask for time to think it over.
Never accept a job offer on the spot. You'll be too focused on the excitement of getting the offer to make a clear-headed decision. Take at least 24 hours to consider the offer—more, if possible.
If the salary is substantially lower than you can accept, give some indication of that when the offer is made. A good way to do this is to say something like the following:
"I've been very impressed with your company and I'd really like to work with you. I'm going to consider your offer very carefully, but I do want to let you know that the salary is a bit below what I had in mind. As I think about this, it would make me feel more comfortable if I knew there might be some flexibility in the compensation package."
By making this statement right away, you let the employer know that some salary negotiation is necessary. The hiring manager or the HR person handling the negotiation can then begin getting any necessary approvals to raise the salary level or look for other ways to sweeten the pot, such as offering a sign-on bonus or additional benefits.
If the employer tells you that no flexibility is possible, you know before you consider the offer that the salary package isn't likely to be improved. It's always possible that the employer is bluffing at this point, or that you'll be able to convince the employer to become flexible later on in the negotiation. But at the very least, you're forewarned that getting an increase in the offer will be difficult.
If the salary you're offered is higher than you expected don't let on and don't rush to accept the job. This situation also calls for some careful consideration. It could be that you've underestimated your value on the market or that there's something about the position you neglected to take into account when you came up with your salary range.
3. Ask for details.
If the employer does not provide them, ask for details about non- wage compensation-insurance benefits, paid vacation days and other perks that add value to the offer. You can say:
"As I'm considering your offer, it will help me to know about any benefits that I would receive in addition to salary. Can we please go over those now, or do you have any literature that explains them?"
Alternatively, you can ask for the name of the appropriate person in HR who can discuss these issues with you. Among the basic benefits you should inquire about are:
- Health, dental, life, and disability insurance. Ask for specifics about coverage, especially for health insurance. Deductibles benefit limits and other features vary widely from employer to employer and can make a significant impact on the total value of the compensation package.
- Retirement or pension plans. Find out whether the employer matches employee contributions to such plans and how long it takes to become vested in the plan (the number of years you must work at the company before you are entitled to your funds).
- Overtime policies. Will you be paid on an hourly basis; offered extra days off as compensation or you are expected to work overtime with no additional pay? Do these policies apply to days you spend traveling on company business?
- Profit-sharing plans
- Vacation days and sick day
- Tuition reimbursement for training related to your job
- Employee discounts on company products
Depending upon the position, you may also want to inquire about the following:
- A company car or a car maintenance and gas allowance (for jobs involving automobile travel)
- A termination contract that specifies a certain severance payment if you're laid off before a set period of time (usually reserved for executive positions)
- Stock options (if the company is a publicly traded firm)
- Moving expenses (if the job requires relocation)
Also, be sure to ask how and when the company awards raises to employees. Find out what you can reasonably expect in terms of annual increases and whether those increases are based on performance or simply on cost-of-living factors. If the company does reward employees based on performance, ask how your performance will be evaluated
4. Evaluate the offer.
When you assess the employer's offer, look at the big picture. Don't think just about base salary, but about the value of the total compensation package. Consider, too, whether the compensation will be acceptable to you in the future as well as today, given what you learned about the employer's pattern of wage increases.
Don't forget to factor in any expenses associated with the job. For example:
- How much money will you spend commuting to the job?
- If you have young children, how much will you spend on day care while you're at work?
- If you're moving to take a job, is the cost of living in the new location higher or lower than where you live now?
In addition to analyzing the offer in monetary terms, evaluate how much personal and professional satisfaction you will get from the job:
- Does the job fit in with your long-term career plans?
- Do you have a reasonable chance of being successful?
- How many hours will you be spending on the job?
- What, if anything, are you giving up if you take the job?
- Will you enjoy the corporate culture, and is it one that values individuals like you?
One word of caution: Some employers, in an effort to convince you to take the job, promise future rewards. They may tell you, for example, that they plan to expand in the next two years and imply that if you come on board now, you'll be the first to head up a new division when the expansion occurs. Take all of this into consideration, but don't agree to work for less than fair market value today in exchange for future benefits unless you're absolutely certain that you'll be paid back in full for your efforts. There's no guarantee that the employer will be willing or able to keep promises made to you.
5. Accept, decline, or negotiate.
If, after careful assessment of these issues, you decide you do want the job and the compensation seems appropriate, you may choose to accept the offer as is. Call the employer and say that you are delighted to accept the position.
If you decide that you don't want the job, no matter what the salary, turn down the position politely and professionally. Don't forget that although this particular job might not be right for you, you may want to be considered for future openings. So be very gracious in your rejection of the offer.
If the offer is lower than you'd like and/or you think the employer may be willing to bump up the compensation a bit, it's time to plot and prepare your negotiating strategy.
Negotiating a Better Deal
Before you respond to the employer's offer and start the negotiation process, determine the minimum package of salary and benefits you will accept in exchange for your services. Then create a "wish list" of the salary, benefits, or perks you'd like to get over and above your bottom line. This is the compensation package you'll request at the beginning of your negotiation.
How much should you ask for? A little more than you think you can get. Shoot above the employer's target salary with the goal of working toward a middle ground that satisfies you both. Include on your wish list some benefits you're willing to concede, so the employer "wins" on those points.
However, be sure that your requests are reasonable given the market value of the position and your qualifications. If your requests are too much above the norm, you'll look foolish, uninformed or not serious about taking the job.
Whatever you do, don't try to justify a higher salary based on your personal financial needs. Sure, you may be concerned about whether you'll be able to cover the mortgage payment, your health club membership, the new car, and day-care costs. But that's not the employer's problem! Focus your discussion on the market value of the position and the skills and experience you will be bringing to the company.
When you have determined your bottom line and created your wish list, you're ready to call the employer and kick off the negotiating process with a statement such as:
"I've thought carefully about your offer, and I want to repeat that I'm very interested in joining the company. However, I do have some concerns about the compensation package that I'd like to discuss with you."
Then work your way through your wish list until you're satisfied with the deal. While you're negotiating, remember that your objective is to get what you want and, at the same time, continue building a good relationship with the employer. So throughout the process, always maintain a positive, cooperative attitude. Be firm in your requests, but approach the negotiation from a win-win standpoint, letting the employer know that you want to work out a solution that will be good for both parties.
How to Get Past Common Salary Objections
When you ask for more than an employer initially offers, it's likely that you'll encounter some resistance. Most employers will try to convince you to bring your price down, just as you'll try to convince them to raise their offer.
Employers typically cite a few standard reasons for not wanting to increase the compensation package. Let's look at these objections and some strategies you can use to overcome them.
1. "That's more than we allocated for the job." Your first strategy in this situation, obviously, is to convince the employer to revise the budget allocation for the position. To do that, you'll have to help the employer realize that the salary is below market value. It's important to make your case politely and without a trace of resentment or annoyance. Emphasize your interest in the job again, and then address the issue of fair market value:
"This position does sound perfect to me, but the salary level the company has established is below what other employers in the area are paying. Although I would really like to work for you, I can't justify doing so for less than market rate, which is $21,000 to $27,000."
2. "You'd be earning more than others at that level." When you hear this objection, you can try one of two responses. The first is to persuade the employer that you should earn more because you're worth more. If you know, for example, that you have a more advanced college degree or more experience than others in the department, you can point that out as evidence of the additional value you'll bring to the company.
The second option is to suggest that you be given a different job title so that you fall in a higher salary range. You can suggest that you assume a few additional responsibilities to compensate for the higher salary. Understand, though, that this won't be an easy battle to win, especially in a large, very structured company. Employers don't like to fool with job titles and salary levels once they are assigned. Generally, you will have a better shot at getting a job title changed if the company is smaller and does not use a formal pay-grade structure.
3. "That's all our budget will allow." The company may very well be unable to provide you with a higher salary. If you think that the employer is being sincere about budget constraints, negotiate for noncash benefits. For example, suggest that you'll accept the lower salary in exchange for a few hours off each week or for additional vacation days.
However, try to get some indication of when the employer expects the budget to improve. If there's not enough money to pay you market value now, there might not be enough next year, either. But if the employer expects a major turnaround soon, you may want to negotiate for future compensation. Suggest that the two of you set specific performance goals for your first six months or year on the job and that you be awarded a certain bonus or salary increase if you meet those goals.
4. "That's too much more than your last salary." Some employers try to base salary offers on how much you made in your last job. You must help the employer realize that your current or past salaries are irrelevant because the value of your last job has nothing to do with the value of the new job. You can say something like:
"You're right—I did earn substantially less on my last job. However, keep in mind that I've been in that job for three years, and the experience I've gained over that time certainly warrants an increase."
An Alternative
"I am paid much less at my current job than you're offering. However, as you're probably aware, I am underpaid in that position; the employer isn't paying market rates. Because that's one of the reasons why I'm considering leaving my current job, I wouldn't want to accept anything less than market value for a new job."
5. "You've been out of the work force for a while." If you're trying to break back into the working world after several years of unemployment, you may find that some employers expect you to work for less because of your absence. The logic, presumably, is that you won't be as productive as other employees because you'll need some retraining. Employers may also assume that you are desperate for a job because you haven't worked for a while.
You must prove that you offer the same skills as others with your same level of experience and therefore are worth full market value. You might ask the employer what skills you would need to earn market rate. Then you can remind the employer that you do offer those skills by pointing to your volunteer activities or other experience.
If that doesn't work, you can say that you'll take the lower salary with the understanding that your performance will be reviewed in six months. Ask the employer to agree that if you meet specific performance criteria—thereby proving that you're equally adept as everyone else with the same job title—your salary will be increased to the going market rate.
6. "I'm sorry, but it's our policy not to negotiate." This is a tough one, because you must determine whether the employer is really being truthful. If you know from your networking contacts or other research that the employer's policy prevents salary negotiation, you probably shouldn't push your luck. But if you think that the employer may be willing to give a little, you can say:
"I understand that you don't normally negotiate on the issue of salary. But I think that you may agree that an exception is warranted in this case, because..."
Explain why the salary is not appropriate for the position and restate your salary request. Again, if the employer can't negotiate base salary, ask for non-cash benefits to build the compensation package to an acceptable level.
Know When to Quit
At some point in your negotiation, the employer will say that the company has reached its maximum offer. If you think that the employer may be bluffing, test your theory by saying politely:
"I'd like to think over this offer tonight and give you an answer tomorrow. However, I think it's only fair to let you know that some compensation issues are still a concern to me. Before I make my decision, is there anything else we can do to resolve these issues'?"
If the answer is no, accept the fact that the employer is either unable or unwilling to raise the compensation package further. Keep pushing beyond this point, and you'll annoy and anger the employer, possibly to the extent that the offer is withdrawn. During negotiations, you want to be stern, but it’s important to remain tactful and to avoid being overly aggressive.
Should You Accept a Low Offer?
Only you can answer that question. You must determine whether other aspects of the position, such as advancement potential, working conditions, or job satisfaction, outweigh a salary offer that's less than it should be. If you do decide to accept the position, however, be sure that you can go into the job with a good attitude. If you feel any resentment about having to work for less than you wanted, you should probably decline the offer. A salary issue that bothers you now will frustrate you even more after you're on the job.
Solidify the Deal
When you and the employer come to an agreement over salary and benefits, write a brief letter outlining the terms of the deal. Verbal agreements have a way of being ignored or forgotten after the negotiation is through. When you have a written document that details your agreement, on the other hand, it's more difficult for the employer to fudge on the terms later on.
Some employers make it a policy to send letters of agreement to all new hires, but in most cases, putting the deal in writing will be up to you. It's better to take on this task yourself than to ask the hiring manager or HR staff member to do it for you—they likely won't appreciate having to do more work on your behalf
Unless you're taking an executive-level position, in which case you might want to consider having a lawyer draft a formal employment contract, this letter of agreement needn't be long or complicated. Begin the letter by restating your excitement about the offer, and then say something like, "To make sure that I haven't misunderstood any terms of our agreement, I've outlined the major points below." Then briefly list the base salary, benefits and perks the employer agreed to give you. Include any agreements about your job title, starting date and special performance bonuses (state the specific goals you're expected to meet along with the rewards you'll earn if you achieve those goals). Also note briefly your understanding of how and when your salary and performance will be reviewed.
Next, say that if you don't hear from the employer, you'll assume that your letter represents the agreement properly. (This relieves the employer of the chore of sending a formal response if everything is in order.) End the letter by emphasizing again that you're looking forward to being part of the company.
Don't Look Back
Most people have a strange reaction after they accept a job offer. They're elated initially, but they soon start having second thoughts. You'll probably experience the same doubts when you say yes to a new job. You may wonder whether you'll really like the work. You may question whether you should have asked for more money. You may be nervous about trying to fit in someplace new or taking on the new challenges.
These feelings are entirely natural. After all, your life is about to change. But don't let fears of the unknown spoil your excitement or, worse, convince you to turn back. You've made an informed, carefully thought-out decision, so celebrate your success and forge ahead on your new adventure. The same strength smarts and savvy that helped you emerge victorious from a very difficult job hunt will enable you to be just as successful on the job.
