Learning how to negotiate salaries serves you well throughout your career.
Economist Linda Babcock of Carnegie Mellon University estimates that by not negotiating salary at the beginning of your career, you could be missing out on between $1 million and $1.5 million in lifetime earnings. Yet a recent Glassdoor survey found that 59 percent of American employees did not negotiate their current salary.
So why do the majority of job seekers neglect salary negotiation? According to this Payscale study, there are several reasons. Two stand out: study respondents reported feeling uncomfortable with the salary negotiation process and not wanting to seem pushy.
Rather than simply taking the initial offer, you can learn how to negotiate salaries confidently without seeming pushy. The following salary negotiation tips will help.
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Your monthly budget is an underlying part of your salary negotiation strategy. Knowing your budget helps you identify your absolute minimum salary requirements.
A prospective employer doesn’t care and won’t ask how much money you spend every month. If you have no idea what your housing costs are or how much you spend on food, transportation, and other expenses, you might accept a starting salary that will not cover your needs.
Whether you are asking for a raise from your current employer or negotiating a salary with a future employer, knowing the salary range for your position is crucial. Get an approximate range from sites like Payscale and Salary.com. Industry and location also affect salary ranges, so make sure you make accurate comparisons in your research.
Don’t limit your salary research to the web. Speak with recruiters specializing in your field. Experienced recruiters should be well versed in current salary ranges by job title in the areas they serve.
Use your professional network. Tap into your LinkedIn connections, college alumni association, or industry trade groups. Conversations about salary ranges with people in your desired position might prove invaluable in your negotiations.
If you enter a salary discussion without researching, you put yourself at a disadvantage. A hiring manager has no obligation to make you a competitive offer. Thorough research helps you recognize when a salary offer is below market value.
Before you negotiate, establish your range. Use these three salary figures as a guide:
- Minimum Salary – The minimum amount you would accept based on your needs.
- Target Salary – The figure you think is fair based on your experience and qualifications.
- Ideal Salary – The amount you would be thrilled with and could not turn down.
You could use 10 percent over your current salary as your target and twenty percent more as your ideal. Set a goal of negotiating a wage between your target and ideal numbers.
Also, compare your range with the salary range you uncovered in your research. Make sure you are not overvaluing yourself or selling yourself short.
Some cities and states have banned employers from asking questions about salary history, but it could come up. Avoid disclosing your salary history if asked about it during an interview.
If your salary history comes up early in the process, turn the question around:
“I’d like to learn more about the role and the company before discussing compensation. What is the salary range for the position?”
You can also dodge the question by steering the conversation toward your target range:
“Based on my skills, experience, and research on this position, I’m seeking a range of [range].”
Revealing your current salary puts you in a position of negotiating against yourself. It might also decrease your earning potential if your current salary is below the market.
Negotiating your salary after receiving an offer is generally better than during the interview process. Playing hardball during the early stages of the hiring process could eliminate you from consideration. You have more leverage once you emerge as the best candidate for the job,
Benefits vary widely from company to company, especially regarding health insurance contributions, dental coverage, 401(k) matching, paid time off, stock options, and bonus plans. Make sure you understand the entire compensation package.
A job with a salary at the lower end of your desired range could come with a very generous employee benefits package. That could influence negotiations.
If the salary is firm, you can negotiate additional benefits or perks. The company may view benefits as a less costly way of keeping employees happy. They could be open to enhancing your benefits package instead of paying you a higher base salary.
You can ask for things like a one-time signing bonus, flexible work hours, remote work, extra vacation time, relocation assistance, or tuition reimbursement. Companies with a limited hiring budget might boost your benefits or perks to get you on board.
Before you dive into salary negotiations, look beyond the paycheck and benefits. Think about what job satisfaction means to you. Aspects of the job that could be more important to you than money include:
- Interesting and challenging work
- Your belief in the company’s mission or products
- Opportunities for advancement
- Available training and learning opportunities
- Autonomy or working with minimal supervision
- Being entrusted with decision making or new responsibilities
- A shorter commute or remote work opportunities
- Having good relationships with co-workers
None of these things appear in an offer letter, but they could make all the difference in your evaluation.
Once you receive an offer you feel could be better, do not immediately respond with a request for a higher salary. That could make it seem like you think your pay rate is the most critical part of the job.
Instead, express your gratitude, tell them you’re excited about the opportunity then let them know you need a day or two to consider the offer. Use this time to create your counterproposal.
When you counter, explain why the offer does not meet your expectations. Share your research into the salaries for similar positions in your field and location.
Highlight your experience, successes, and skills. Remind the hiring manager why you’re the best candidate by tying your best attributes to the responsibilities presented in the job description.
Being a savvy negotiator does not mean being deceptive or dishonest.
Do not lie about your current compensation package, use false references, or suggest you have another offer if you don’t. You never know who knows who in your industry. Catching you in a lie might be one quick phone call away.
Instead of deceiving your potential employer, stress the value you bring to the company. Emphasize how well your skills match the job qualifications.
Rehearse your salary negotiations with a friend or family member. Practice with someone who interviews candidates and makes hiring decisions if possible.
Run through your case with your practice partner as long as it takes until you feel comfortable. Ask for feedback on your content and delivery. Have them ask you questions or offer rebuttals to your points.
Confidence, self-awareness, and strong communication skills are traits most employers value. Practice will help you further develop those skills and might help you get the offer you want. A persuasive pitch reflects your confidence in your abilities and communicates how you can help the company succeed. Dressing to impress your boss and management may help set the tone for your interview.
Negotiations can be stressful. You may get tough questions or get an answer you do not like.
Stay calm, gather your thoughts, and deliver your response with professionalism. When you respond with professional grace, you can maintain a good relationship regardless of the outcome. That could lead to future opportunities if things change.
Showing anger or frustration burns bridges. It could also limit your career prospects.
A lowball offer does not mean you have delusions of grandeur or no future at the company. Companies make low initial offers for several reasons. Their hiring budget could be limited; they could be opening low with the expectation that you will negotiate, or their research on market salaries could be outdated.
Whatever the reason, do not take it personally. Companies aren’t out to waste their time or yours. They didn’t set out to interview you and make the job seem appealing so that they could insult you with a terrible job offer in the end.
Keep your initial response neutral. Buy yourself some time to think it over. Use that time to prepare your counteroffer.
Once you deliver your counter, it is out of your hands. No matter how compelling a case you make, the company can say no. If they do, you have a decision to make.
If you need the job and it meets your minimum salary requirements, you can resolve to do well in this job while you keep your eyes open for the next opportunity.
Part of a successful negotiation strategy is knowing when to walk away. You did your research and came up with a minimum acceptable salary. As long as no dire circumstances force you to accept any job offer, you can confidently decline a final offer that doesn’t meet your minimum.
Accepting a salary offer you know is less than your minimum and below market value makes thriving at work difficult. If you show up on your first day feeling undervalued and questioning your decision, you will probably end up conducting another job search sooner rather than later.
This article by Sara Graham of the Kinda Frugal blog originally appeared on Wealth of Geeks and, was republished with permission.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.