Negotiate Compensation

Before you can adequately negotiate a compensation package, you need to find out what the industry standard is for your position and location. Proper research will allow you to confidently approach negotiations secure in the knowledge of what you are worth. Your success will depend on remaining calm yet firm.

Steps

Doing Your Homework

1. Research salaries for comparable positions. Effective negotiation requires that you know the market rate for the job that you are applying for. This means researching what people in comparable positions make in your market. You can locate this information in several ways.
   • Ask co-workers. First, you can talk to anyone at your company who works in the position you are interviewing for. Although many co-workers might not like to talk about their salaries, you could still ask. When you are interviewing for a new job at your current employer, your co-workers remain your best source of information.
   • Research salaries at PayScale or Glassdoor. These websites collect salary information for various companies, in particular larger national firms. They publish average salaries for various job titles.
   • Find salaries of comparable companies. If you can’t find salary information specific to the company you are interviewing with, then you should find salary ranges for companies of comparable size. Make sure the company is in the same region or state, as compensation can differ significantly according to region. You can find this information by looking on Glassdoor or PayScale or by performing an Internet search.
   • Search online for government information. If you are interviewing for a government job, then the Internet often contains salary and benefits information. You can find compensation information for the federal government and for states by doing a web search.
2. Settle on a salary range. To be an effective negotiator, you need to settle on two numbers: your ideal salary (the top range) and the least amount you would settle for (the bottom range). You then negotiate with an eye toward the first number. But you walk away from the negotiations if the employer cannot meet the second number.
   • Give sufficient thought to your salary range and avoid setting the range too low. According to researchers, women in particular tend to undervalue their worth.
   • To avoid this problem, look at the standard salary ranges in the field. Then consider what skill or unique experiences you have that will increase your value to the company.
3. Justify your compensation range with reasons. Be prepared to back up your compensation demands with reasons why you are worth that amount. Keep the reasons short, so that you can easily remember and repeat them. Write them down and memorize them before going into compensation negotiations.
   • In particular, point to your experience and what is unique about it. If you have particular skills (language skills, computer skills, etc.) that are not common in the industry, then you should be sure to highlight those.
4. Practice negotiating. Negotiating might feel unnatural to you. Indeed, many people would rather avoid it entirely. To become comfortable, you should practice with a friend. The friend can pretend to be the employer.
   • You should prepare for both “hard-style” and “soft-style” negotiators since either present problems to the novice negotiator. Have your friend adopt both roles so that you gain experience handling each personality type.
   • A “hard-style” negotiator likes to say, “No.” To negotiate effectively, you need to avoid getting rattled. Instead, you should press your compensation demands, justifying them and maintaining an upbeat attitude.
   • By contrast, the “soft-style” negotiator comes across as agreeable. These negotiators create problems because people often focus on getting the negotiator to like them. Instead, you must focus on the negotiation and on what’s best for you.
   • Watch out for soft-style negotiators who you already know, e.g., someone in a different department at your company. You should focus on getting a compensation package appropriate to your skills and experience instead of maintaining a friendship with the negotiator.

Negotiating Your Compensation

1. Try to delay discussion of compensation. When you are interviewing for a job, try to postpone any discussion of salary for as long as possible. Experts believe that it is important to first make prospective employers fall in love with you before they find out how much they have to pay in order to hire you.
   • If the interviewer asks about salary requirements, be prepared to deflect. Try to turn the conversation around to something else. For example, you could say, “Before talking about salary, can I hear a little more about…”
   • Ideally, you will wait until you have the job offer before discussing compensation. Sometimes, though, employers require that applicants list their minimum salary in a cover letter. Always express your preferred salary as a range, e.g., $30,000-40,000. A range is better than a definite number.
   • You might discover later that your salary range is too low. In that case, you can adjust it during the negotiations. For example, explain that you didn’t understand all of the job responsibilities when you came up with the initial figure. Now that you understand the full requirements, you think the salary range should be higher.
2. Wait for the employer to put a number on the table. By waiting, you can avoid making a low initial offer. If the employer asks you to give a number, you can deflect by doing one of the following:
   • ask what the typical compensation range is for others in the same position at the company
   • ask how much has been budgeted for the position
   • say you’ll consider any reasonable offer and that they have better information as to what is reasonable
3. Counter with your own offer. Once the employer makes an initial offer, you should always counter-offer. Resist the urge to accept the first number. The employer expects you to negotiate. Accordingly, their initial offer should leave room for them to go higher.
   • You can counter-offer with your ideal amount. For example, if your ideal is $55,000 but the initial offer is for $45,000, then ask for $55,000. The employer may or may not accept it, but you will not get to $55,000 unless you put the number out on the table.
4. Offer reasons for your counter-offer. Be prepared to justify your counter-offer, especially if you are dealing with a “hard-style” negotiator. For example, you could inform the negotiator that you helped your current employer start two new programs which you helped oversee. You could say, “Thank you for the offer. I’d love to work for you. But given record of performance, I was expecting something around $55,000.”
   • Speak plainly. You can’t be hesitant when you negotiate. If you want more money, then ask for it. One thing to avoid is asking for more money but justifying it by talking about your expenses. For example, you should never say, “Well, I just took out a second mortgage, so I could use more money.” Instead, you can say, “I need more than that.”
5. Be confident, not demanding. You should negotiate with confidence. Since you have done your homework, you know that what you are asking for is not unreasonable. If the employer can’t meet even your low number, then you should be prepared to pass on the job. However, you should never issue ultimatums.
   • For example, you should never say, “This is my final offer!” Instead, say, “I need at least $55,000 to make the change in jobs work for me.”
   • Always be respectful. Imagine that you have already been hired by the company and are negotiating on their behalf. You don’t want the way you comport yourself to discourage the employer from hiring you.
6. Remember benefits. Your total compensation embraces more than salary. It can be easy to forget about the other benefits as you throw numbers back and forth. You will probably negotiate salary first, but you should always remember to negotiate the remainder of your compensation package:
   • any bonus (annual, quarterly, or other)
   • stock options or units
   • pension or 401k contributions
   • health and wellness benefits, such as medical, dental, and vision
   • insurance programs (basic life, accidental death, disability)
   • educational reimbursement programs
   • other perks, such as gym memberships, cell phone service, transportation reimbursement, Internet, etc.
7. Write down what you agree to. If you come to a tentative agreement on salary, write down the number on a notepad. As you move onto other parts of the compensation package, you might forget what the salary offer was.
   • There is often an element of trade-off involved in negotiating compensation packages. For example, you might think the salary is a little low, but you will be offered vacation days than you had hoped for. In this situation, you might be willing to accept a slightly lower salary.
   • So that you do not forget all of the elements of the compensation package, write them down as soon as you come to a tentative agreement. Refer to the list as you discuss the remaining parts of the compensation package.
8. Stay impartial. Effective negotiation requires understanding that the negotiation isn’t personal. It’s a business transaction. If you are upset about a low initial offer, try not to be. You don’t know everything about the company’s finances; maybe the company wants to offer more but can’t. A salary offer that is less than what you would hope for is not a judgment on you personally.
   • Similarly, don’t be offended if the employer resists your counter-offer or comes back with another offer.
9. Take time to consider any final offer. After the employer has made a final offer, you should ask for a few days to consider it. Don’t accept it immediately or reject it immediately. Instead, take the time to get some distance and consider the offer objectively.
   • Most employers should give you up to a week to consider the offer.
10. Get the offer in writing. Once you have agreed to a compensation package, you should ask the employer to put everything in writing. The employer should be happy to do so.
    • If the employer resists, then reconsider working for this company. It is standard business practice to reduce contract offers to writing.

Tips

• Pay attention to whether or not you are making market rate in your current job. If you aren’t, then your prospective employer may want to know why you are paid below market. Have a couple of reasons on hand. For example, you might work at a new company that isn’t established yet, or you took the first job you could get because you moved with a spouse to a new area.

References

See also

• Calculate Your Annual Salary when You Work Part Time
• Negotiate Pay
• Make a Job Offer to Prospective Candidates
• Respond to a Job Offer
• Negotiate Locum Pay
• Evaluate Employee Benefits of a Potential Job
• Confirm a Job Offer from Another City
• Write an Acceptance Letter
• Advertise Job Openings
• Negotiate a Job Offer That Involves Relocation

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