Personal Finance

15 Tips for Negotiating Your Salary

negotiations road signNegotiation. It can be intimidating, particularly when the person sitting across from you is your boss. When it comes to the matter of your salary, negotiating is something each and every one of us should be doing, although only a fraction of us have the wherewithal, and the guts, to actually go ahead and do it. This holds true for any job position, whether it’s your first gig, you’re a new hire, or you’re looking to get that much deserved raise at the firm you’ve been with for the majority of your career.

You’ve work hard to get that job or promotion, but you can’t expect the conversation about your compensation to be easy. Employers want good, reliable employees, but they also have a bottom line to consider.  While most of them are more than willing to pay what they think you’re worth, there are always exceptions to the rule who may hold back on giving you that extra bump in pay. Unless, of course, you make the effort to ask for it first.

Recent surveys reveal that only a small number of employees are actually engaging in that conversation about higher pay.  In fact, an average of roughly 35% of new hires who are just joining a company’s ranks negotiate their salary. That number rises only slightly to nearly 44% of employees who broach the subject during routine performance reviews at a job where they’ve gained some seniority.

Breaking the numbers down by gender results in even more disparate rates.  Over half of men surveyed engaged in salary negotiations during their first hiring interview while less than 10% of women made the same attempt at a similar time.

One thing is certain, those who do engage in the practice of negotiation have found satisfaction to the tune of roughly 7% increase in salary. That may sound nominal, but over the course of time that small percentage represents a major amount of additional income coming in.

Is that money you would like in your pocket? I’m guessing the answer is yes, in which case you need to embrace negotiation as part and parcel to the hiring experience.

This holds true whether you’re just joining the company or trying to move up within its ranks, as promotions and raises are going to require the same adherence to ensuring you are paid what you’re worth. Don’t expect your employer to be the one to freely give up additional compensation, you will need to do some convincing to get them to release those purse strings.

It’s best you get started now on honing your skills for negotiating your salary in any hiring situation because there are different strategies necessary for different situations. Negotiations at the time you’re hired for a new gig are going to vary from a negotiation for that raise or promotion.

But one thing remains the same throughout: a failure to negotiate for a better salary will almost always result in leaving money on the table. Money that you could be earning for your family.

Don’t make the same mistake that so many others before you have made. Here are the things you need to keep in mind before you walk into that room with your employer.

1. Build Your Case

Before you walk into any salary negotiation, you need to be well-armed with a strong argument as to the salary you want and why you feel you deserve it. That begins with doing a little research into the industry standard for compensation at that position in your geographical area. Do your homework in that regard to have a number in mind that you want to reach.

You also want to have any perks or concessions in mind that you want to gain as well.  For example, consider the ability to work from home one day a week, receiving extra vacation days, or getting permission for an expense account.

Building your case also requires you to present viable reasons as to why you feel you should get what you’re asking for in the negotiation. If you can’t present them with smart reasons to justify why you should receive a higher salary then you’re going to look petty and frivolous, which is not a good look to have in a salary negotiation. So build a strong and cogent case before you enter the room and you’ll have a much better shot at getting what you seek.

2. Aim High

When you begin doing your research into what someone in your position within your geographical area is receiving as compensation, you’re likely going to find a range of numbers. Though you may feel more comfortable aiming for the middle of that range of numbers, you’ll do yourself more good by aiming for the high end.

When you go into a negotiation already conceding that you don’t deserve the highest compensation in the industry, then you’ve put yourself at an immediate disadvantage. That will show your employer that you don’t really value your worth as someone who deserves to be paid top dollar commensurate with the industry standard.

Not only does that lower your bargaining power, but it also potentially lowers the money you could be making as your employer will most likely negotiate down and then you’ll find yourself at the low end of that compensation spectrum. This is not where you want to be, of course. So aim high to give yourself a cushion for negotiation that will get you closer to the number you’re looking for at the higher end of the compensation range.

3. The Cost of Living

When you’re working towards figuring out that compensation number, you’ll also want to take into account where you’ll be living in order to take that job. You could be moving to a new city to accept an offer and that place could have a far different cost of living than where you currently reside. This is important to keep in mind because living in Manhattan in New York City is going to cost considerably more than living in Manhattan, Kansas.

Take into account the price of everything where you are going to live in order to work. Rent, utilities, transportation, even the cost of food and entertainment.  All of these expenses are going to inform the size of the salary you’re going to want to negotiate. The best way to figure out what the numbers really look like is by referring to the cost of living index for the city in which you will be working.

4. Be Specific

You’ve done your research into the compensation range for your position and carefully considered the reasons you feel you deserve your desired compensation package. Now it’s important to be very specific about what you want when you make your case during a negotiation.

The most crucial aspect here is to be precise about the number you ask for. It’s not enough to say you want $70,000 a year, give them a definitive number like $69,485. It may sound odd to be so exact to the last number, but doing so will actually help your case during a negotiation.

You’ll give your employer the impression that you’ve really done your research here and come up with an amount that reflects careful inquiry into your current market value. This will make them more likely to meet you closer to the number you’ve given.  The first ballpark figure at a round number only gives them more leeway for negotiating you further down. Don’t afford them that opportunity. You’re in this thing to win it.

business handshake two men5. Know Who You’re Dealing With

You’re in this thing to win it, but so is your employer. The best way to come out on top in any negotiation is by knowing the mindset of the person sitting across from you.

If you’re dealing directly with your boss, chances are you’ll have a little more leeway with respect to getting the perks and deal points you really want by appealing to him or her with your specific reasons why you should get the things that you are asking for in a compensation package.

However, you may be dealing with someone from the human resources department instead. This can present a different set of obstacles you’ll need to navigate in a negotiation. On the one hand, it’ll be easier to ask questions about the offer and try to get allowances for perks or compensation that your boss may never know you asked to receive.

On the other hand, the HR representative is probably dealing with a number of hires at one time. That can make the process feel more like a cookie-cutter scenario where affording allowances for one hire sets a dangerous precedent for other employees to attempt later.

6. Be Ready to Answer Questions

You’ve built your case and have come ready to present strong reasons to support what you’re asking for in the negotiation. Now it’s time to present your argument to your employer. Even more importantly, you need to be ready to answer potentially difficult questions that they may throw your way. These could range anywhere from inquiring if the company is your top pick to whether or not you have any other offers at the moment.

Employers want to know if they’re wasting their time in a negotiation, so they’re going to be sure they’re working with someone they will eventually be able to hire after the negotiating process is complete. If they get the feeling that you’re merely doing all of this to get a better offer at another company, then they will balk at continuing to negotiate.

Therefore, you want to make them feel assured that you’re ready, willing, and able to work for their firm. The way you answer some of these questions could put you in a tight spot. If you come across as unsure, evasive, or flat-out lie, you might put yourself at a disadvantage later on. Answer with too much eager gusto and you could tip your hand early and minimize your bargaining position.

7. Job Offer vs. Salary

There is a definitive difference between negotiating your job offer and negotiating your salary. Unfortunately, most people don’t understand this going in, but it’s imperative that the negotiation incorporates each of these things separately. This is important because the perks and concessions you may gain with respect to things like vacation days, travel, the size or location of your office, parking spot, opportunities for promotion, and other perks will play an important role in your negotiation.

You may be able to get additional allowances in lieu of higher pay at the start of your tenure with the company with the goal of earning a better compensation package at the time of a promotion in the near future. Take everything about your job offer into account and combine the overall value with compensation and perks together in negotiating your position with your employer.

8. You Don’t Always Need to Negotiate

Chances are you dealing with an employer as a first hire or during a negotiation for a raise and their initial offer to you as actually pretty great. The compensation is more than fair and they’ve afforded you a few perks as well. This is a solid offer that both sides should find acceptable.

In this case, ignore your instincts to haggle for additional items.  They’re likely going to be small details that are ultimately unnecessary and may paint you as someone who is ungrateful and petty.

That’s not the image you want to portray, particularly with a prospective first employer as you enter the job market. Refrain from overstepping your bounds and you’ll know where that line is drawn pretty quickly once you receive the offer. If it all seems generous up front, then say thank you and accept. Don’t ask for more.

9. Be Prepared to Step Away from the Table

Negotiations don’t always go the way we hope. It happens all the time and in an effort not to waste yours for any longer than necessary when a negotiation isn’t working out, you’ll want to decide on a lowball figure that you’ll consider a dealbreaker. The way you come up with that number should be considered in light of that research you performed into the market rate for someone in your position within your geographical area.

But it’s important that you walk into the negotiation with the ability to walk out without a deal being reached. It may be tough to do at first but you can make it easier on yourself by knowing at what point you are ready to walk away. This will give you the confidence to turn down their final offer and help you avoid going through the process any longer than necessary.

10. The Importance of Timing

Asking for a raise hinges on a number of important factors that you’ll want to consider first. It’s all about timing and keeping current with market value and the cost of living, while also considering if it’s the right time to ask.

The first thing to ask yourself is how long you’ve been with the company. You’re obviously not going to ask for a raise after just six or nine months, but a year or even two is an acceptable amount of time to pass before putting in for that raise.

The cost of living increases each year, your colleagues and contemporaries are likely getting fair market value for their work, you should be no different. Check out the cost of living index in your area and weigh it against what you’re currently making annually. You may discover that there’s no time like the present to initiate the conversation about a raise.

win win chalkboard11. Don’t Get Emotional

A negotiation is a discussion that is intended to reach a result that both parties find acceptable. It should never be seen as adversarial and shouldn’t reach the point where anger or ultimatums come into the picture.

Stick solely to facts and statistics, focus on your positives, review your strengths, and remind your employer of all the good things you’ve done for the company thus far if it’s a promotion or a raise that you’re trying to negotiate.

If you’re a new hire negotiating a salary, remain amiable and likable throughout the negotiation and stress ever so subtly why you’re the best fit for the position and worth every penny that you are asking of them. Just keep the emotions out of it.

12. Take a Test Run First

Before you go into a negotiation for a new job, a raise, or a promotion, practice what you’re going to say first. Jot down some notes, create a fact sheet if you must, and try out your pitch in a mirror or in front of one of your friends who can offer you test questions and responses that might come up during the negotiation. Continue running through it repeatedly until you feel comfortable and confident in what you plan to say in the meeting.

Use this time as an opportunity for tightening up your argument, focusing on the points that are most useful and helpful in making your pitch to your boss, and rehearsing sharp and concise answers to some of the most challenging questions that could come your way during the discussion.

13. Exude Confidence

There’s nothing worse than entering into a negotiation from a level of weakness or apprehension. So get those things out of your head at once. Focus instead on all of the good attributes that you offer to the company and go in there knowing that you’re already dealing with an audience who likes you, otherwise why else would they take up their valuable time hashing out a compensation package with you?

If you’ve been at the company for a few years now, they already know you and what you’re capable of delivering for them. This only puts you at an advantage. So don’t feel nervous or unsure about yourself, but don’t walk in there all cocky either. Just be confident about who you are, what you offer the firm, and that you deserve the things you’re asking them to give you.

14. The Numbers Strategy

When you’ve entered the room to negotiate, it’s important to use strategy in getting to the number you want. One of the best ways to do that is by throwing down the gauntlet and revealing yours first.

They call this “the anchor” of the discussion because the rest of the negotiation from this point forward is dictated by what you’ve asked them to give you. From here on out, every deal point and counteroffer will be based around the anchor number, which is why you always want to aim high (in case you’ve already forgotten Tip #2 above), because otherwise their final offer may be much lower than you had anticipated.

15. Always Listen

A negotiation can only be as successful as the people involved and it only works when those people are listening to one another. That’s the way you find common ground – by hearing out what the other party has to say and finding ways to compromise on a meeting in the middle of the two opposite ends of the spectrum. It’s in our nature to talk and want to be heard, but when no one is listening to what you’re saying, you’re wasting your time.

Listen to what the person across from you is saying, so you can take his or her concerns and needs into account when working on a solution to the impasse that might exist in the deal. Listening is far more important than talking when it comes to negotiating your salary. Be sure to remember that when you sit down at the table.

Our Final Thoughts

Salary negotiations are not the most pleasant thing in the world to undertake, but we hope these helpful tips will give you some advantage in getting the salary and offer that you feel that you’re worth. Just remember to get your facts straight, always be direct, don’t let emotions get in the way, and above all, remain truthful and ethical at every stage of the negotiation.

Your employment arrangement should benefit both parties as the company is looking to hire and/or retain the best man or woman for the job — and that happens to be you. Therefore, you should be paid as such in return. You can reach that point, but you can’t do it if you don’t negotiate. So be sure to engage in some kind of discussion before you sign on the dotted line.

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