The best opportunity for you, as a salaried worker, to improve your income is through the salary negotiations that occur when you are offered the job and usually every year after that. It is hugely important to negotiate the highest possible salary for yourself right from the start. This is because it sets a base for your future earnings. Annual reviews tend to be an increment on that initial base and it is difficult to negotiate a much higher salary once this base has been set.
Most people getting their first full time job are so relieved to get the offer they forget to negotiate their salary. The employer usually presents the salary to you as if it is an industry standard, or an afterthought, inconsequential in comparison with the big favor of offering you a job. Don’t be fooled by this. Although you are not in the strongest bargaining position, there are some factors that strengthen your position.
Factors that Strengthen your Position.
- The most important thing to keep in mind is the employer has picked you. Out of all the other applicants, they decided that you are the best person for the job. If you don’t take the job they will have to hire the second best person, which is a less appealing outcome for them.
- If the company is bigger than just a few employees, the person who offers you the job is not using his/her own money. The money to pay you comes from their salary budget, not from their pocket, it does not affect their own income if you are paid a bit extra. On the other hand, you have much to gain.
- The person hiring you is under pressure to complete the process of hiring you. While the job is vacant, that work is either not being done or is being farmed out to people who are already busy. In larger organizations the process from the job being vacant to filled can take half a year and often much longer.
- Taking into account superannuation, payroll taxes, health benefits and the many other things companies offer their employees and benefits that the government requires them to provide, the actual cost of hiring someone at the lower levels is about double the salary. Asking for a little bit more is not going to make a huge difference to how much you actually cost them. So an extra $2,000 on a $50,000 annual salary will cost them an extra 1% if their total cost of hiring you is $100,000. Also, when you consider that their total payroll may be in the millions of dollars, the few extra thousand dollars they pay you is not going to make a big difference to them.
- Showing that you are willing and able to negotiate your salary might even impress your new boss. Business is all about negotiation. Whether you are in sales or shuffling paper, you would be surprised how often a negotiation arises in the course of a day’s work. Think of your salary negotiation as your first duty in your new job.
Salary negotiation starts before you apply.
In many situations you are already employed and have useable skills. You should be talking to managers among your company’s competitors. Eventually one may start discussing the possibility of you working for them. Let them guess how much it would take to get you to move. Then suggest to them ways they could improve their offer to make it reasonable for you to do that.
When the employer agrees to hire you but before you agree to the salary is the time to start negotiating seriously. By this point they have already spent time and money chasing after you, they don’t want to go back to square one now. This is the moment where they will not refuse to employ you just because you decide to negotiate. The worst thing that can happen to you now is you will get what they offered at the start. Negotiating never makes the offer worse. In the unlikely event they actually withdraw the offer only because you tried to negotiate your salary they are not going to be a good business to work for, anyway. A company that would do that would be the kind that treats its workers in the worst ways. A company that only wants to hire you if you are cheap is also unlikely to be a good employer.
Don’t let them draw you into a salary discussion before they offer you the job. Be sure the job is yours, subject to agreement on salary terms. Don’t let them transition from job interview to salary negotiation and back to job interview.
Let the employer make the first offer.
An employer will often ask for:
- your salary history; or
- how much you expect to be paid.
If you give them this information, you put yourself at a disadvantage. If you tell them how much you were paid by your current or former employer they will use that salary as a base for their own offer, which may be less than what they were willing to pay. If you nominate how much you expect, they will either try to bargain it lower (making you look foolish for expecting more than they say you are worth) or they will accept it (meaning they were probably willing to pay more).
The matter of who makes the first offer is so strategically important that the employer can use a variety of tactics to make you go first. Some tactics include:
“We need to know so we can continue the application process.” This indicates you have not been offered the job yet. Ask them to set the matter aside until you are comfortable with what the company has to offer you.
“We need to put something in the box to complete the form.” Tell them to put $1 in the box and they can come back to it when they are closer to finishing the process.
The best way to avoid disclosing your former salary, however, is to take the moral high ground. Tell them you think it would be a breach of trust if you disclose how much your former employer pays its staff.
- Use social media to research. Hit up Facebook, Linkedin etc. to find potential colleagues and past employees. Ask them about employment conditions, what the company values most highly, what non-monetary compensation the company might offer.
- If they say the HR department sets the salary for each position don’t believe them. Unless they are government or a huge corporation it is very rare for HR to have more authority than a department manager and your duties may be more than they accounted for when they originally created the position.
- If you reach an impass on salary, offer to set that matter aside and consider other conditions. Perhaps you will accept more holiday leave in return for a higher base pay? Work hours, project assignments, travel opportunities, professional development opportunities etc are all useful bargaining chips.
- Take notes of what they offer, particularly any numbers and matters to do with conditions. Later, ask them to email their offer to you. If they don’t send that email, send one to them setting out what you understand their offer to be. If they confirm anything in writing, they will have to stand by it and you can use it as a base for further negotiation.
- Remember, there is no such thing as a ‘standard contract’. Read your employment contract carefully and (in consultation with them) strike out any paragraphs which are unacceptable.