Labor Market News

Compensation Negotiation: Part 2

Compensation Negotiation:  Part 2

Source:  Career Watch Arkansas

In part one of our “Compensation Negotiation” series, we talked about using the numbers from Labor Market Information and the Bureau of Labor Statistics to back up your claim for requesting a raise or negotiating your starting salary, but we didn’t go over effective methods to reach a conclusion to those negotiations. In this article, we will give tips for negotiating a salary and why salary negotiation is important in both the short- and long-term.

When entering salary negotiations, it is important to get into the mind of the employer and what is going on in the mind of the individual on the other side of the table. Employers are looking to present their offer without playing any games with the applicant and getting into a counter-offer situation with the applicant’s present employer. In trying to avoid this, employers will try to follow their own list of tips. Check out the employers’ tips for themselves below so you can get a leg up on the competition:

  • Do your homework. Research external factors such as market value for the position, demand for qualifications, and economic/industry outlook.
  • Do not provide the salary to the applicant – have them be the first to name a salary range.
  • Encourage the candidate to discuss opportunities with their present employer PRIOR to your offer.
  • Have an attorney review any employment contracts and the offer if necessary (for high value positions).
  • Offer letters should include a deadline for acceptance, a contact to report to, a start date, and where to report.
  • Make an initial offer verbally to assess reaction.
  • Put together an offer package. Consider salary, bonuses, benefits, work hours, and relocation (if applicable).
  • Have a preset deadline for acceptance.
  • Know your bottom line and when to walk away from the applicant. Also, keep the quality of your other applicants in mind.

When in a counter-offer situation, here is a list of what employers will likely look for:

  • Insignificant items used in leverage, such as an extra two days of vacation or a new job title.
  • Demands showing unwillingness to compromise.
  • Irrational negotiating.
  • A “money-only” oriented applicant.

Seeing what the employer is thinking will allow you, as an applicant, to understand where the employer is coming from while also allowing you to grasp which tactics can work to your advantage. Below are some negotiating tips that can help you leverage a higher salary:

  • Avoid giving salary requirements until you have the job offer. If questioned, give a vague answer, like, “By working hard and providing value, my salary has steadily grown along with promotions and responsibilities.”
  • Don’t be the first to name a salary expectation. You may seem too demanding, out of range, or under-qualified.
  • Salary discussions are best left until after all interviews and when you are being presented with a job offer. You have a much stronger negotiation position after it is determined you are the best person for the job.
  • Most jobs have salary ranges. What range is authorized for this position? Negotiate within this range, focusing on your worth.
  • Target your salary within 20 percent of the company’s expected salary range, and be prepared to justify your higher number.
  • When you discuss salary figures, give a range – your expected salary at the bottom and what you desire at the top. For example, $40,000 to $50,000: you expect $40,000 but hope to negotiate higher.
  • The lower the job level, the lower the negotiability of the salary, because there are generally more qualified applicants for these positions.
  • If the offer is unacceptable, don’t be afraid to ask directly if that is the best offer the company can make.
  • Show flexibility. Counter offer instead of rejecting an offer outright.
  • If you must receive a higher salary than is offered, suggest additional responsibilities to justify the increase in salary, or ask for an earlier performance review and raise.
  • Evaluate benefits. They are often one-third of the total compensation value and may be negotiable. Good ones to look for and understand are the following:
    • Cafeteria plans or medical/dependent reimbursement plans
    • Pension or 401(k)
    • Medical, dental, vision insurance
    • Profit sharing, employee stock plan
    • Signing bonus
    • Stock options or performance bonuses
    • Life, disability insurance
    • Promotion and raise schedule
    • Vacation, sick leave, and personal time off
    • Flex hours, telecommuting
    • Tuition reimbursement
    • Company assets – car, computer/laptop, cell phone
    • Health club membership
    • Relocation expense
  • In a group evaluation, use individuals you connected with during the interviews to help negotiate for you internally.
  • Make sure to negotiate based on the cost of living where you will be living and working.
  • Study salaries of comparable jobs with similar companies. Knowing your market value will strengthen your negotiating position.
  • In evaluating offers, consider title, opportunity for advancement, company reputation, culture, commute, and ability to work with your potential manager.
  • Don’t accept any offer on the spot. Show interest, but ask for time to think it over. Refrain from disclosing your need to discuss the job offer with your spouse. Get the offer in writing.
  • Contact companies with whom you’ve interviewed. Give them a chance to match the competing offer or top it.

Using these tips to your advantage can make a colossal difference, especially throughout the duration of your time in that position. Luckily for you, there have been many studies done around the country that help reinforce this fact.

For example, Stanford University negotiation professor Margaret A. Neal explains salary negotiation in simple terms: If you get a $100,000 salary and your co-worker negotiates up to $107,000, assuming you’re treated identically from then on, with the same raises and promotions, you’d have to work eight years longer to be as wealthy as them at retirement.

The Harvard Law School blog explains the long-term approach and other factors that some might forget.

“Take a long-term perspective. Most candidates focus on salary, bonus potential, and other ‘year one’ items, such as a signing bonus. But what happens after year one? With a little research, you can gain critical insights on future salary trends. For example, Company A’s $80,000 salary might sound better than Company B’s offer of $70,000; however, Company A only provides cost-of-living raises,” it says. “Even a $5,000 bump can make a big difference in the long run. For example, a 25-year-old employee who enters the job market at $55,000 will earn about $634,000 more over the course of a 40-year career (assuming annual five percent raises) than an employee who starts out at $50,000.”

Along with these examples to help reinforce how important a salary negotiation can be, psychology also plays a role (aside from just being psychologically prepared for the negotiation talks).

Psychology Today, a magazine published once every two months, found that you should set the meeting for your negotiating on a Thursday.

“Thursdays and Fridays find us most open to negotiation and compromise because we want to finish our work before the week is out,” the article states.

Debbie Moskowitz, Ph.D., a psychologist at McGill University in Montreal, says this is contrary to what people expect.

“People tend to think that they get more disagreeable during the course of the week,” she says. “In fact, people start out that way and get more agreeable later in the week.”

The article goes on to state that this is due to the elimination of hard-line behavior as the week progresses, allowing individuals to become more flexible and accommodating. Use this to your advantage when negotiating for a higher salary; every little thing helps. 


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