There are generally two opportunities to influence how much money you make: when you get a new job and when you ask for a raise in an existing job. Money is usually the most sensitive issue in the hiring process. Discussing compensation often causes anxiety for both employee and employer. Negotiating an initial salary can be stressful; it doesn’t get any easier once you have the job and want a raise.
Confidence is important in negotiations. You’ve probably heard the phrase, “Negotiate from a position of strength.” Strength comes from confidence. Confidence comes from being prepared (doing your homework), reaching the right decision-maker, having the right timing, and knowing what you want out of the negotiation. One of the best things you can do to boost your confidence is to practice (role play) your salary negotiation with someone. Ideally, practice with someone who has negotiation experience — for example, a friend or neighbor who is in sales, or who is a lawyer. This guide will help you with the rest: research, timing, and assessing your strengths so you can justify a higher starting salary or a raise.
According to a 2017 CareerBuilder survey, 53 percent of employers are willing — and expect — to negotiate salaries on initial job offers for entry-level workers, but only 44 percent of workers do, potentially missing out on thousands of dollars. Fifty-two percent of employers say when they first extend a job offer to an employee, they typically offer a lower salary than they’re willing to pay so there is room to negotiate. And 26 percent of those employers say their initial offer is $5,000 or more less than what they’re ultimately willing to pay.
Negotiating a Salary at a New Job
Money may seem like the biggest factor in accepting a job, but it can often cloud your decision-making process. Don’t accept a job that you’re not enthusiastic about simply because the starting salary is a few thousand dollars higher than what you’re currently making. It’s probably more important to find a job that lets you do something you enjoy. Ask yourself whether the position presents a career path with upward movement and long-range income potential.
If you’re getting a job offer — and salary discussions usually don’t happen unless you’re a serious candidate — negotiation is an expected part of the process.
What’s the worst that can happen? You may not get all that you’re asking for. You may only get some — but that’s more than you started with. It’s rare (extremely rare!) that a job offer would be rescinded simply because you asked for more money.
Have a positive attitude about salary negotiations. Negotiation is basically a process that could benefit both parties. Understand your needs and those of the company. It is possible to reach a win/win solution. Don’t be aggressive or demanding when negotiating salary or a raise. Keep your tone friendly and civil.
Negotiating a higher starting offer initially can make a big difference in your pay over the long-term. In addition to getting more cash up front, your annual raises will also be based off a higher starting salary.
Let’s say you accept an offer of $35,000 for an entry-level job and are given annual pay increases of 3 percent. After five years, you’ll be making $39,392. On the other hand, if you negotiate a starting pay of $38,500 (a 10 percent increase), after five years, your pay will be $43,331.
The individual who started at $35,000 made $185,819 during those five years; the person who negotiated a starting salary of $38,500 made $204,399 — a difference of $15,917.
| Starting Salary of $35,000 | Starting Salary of $38,500 | |
| Year One | $35,000 | $38,500 |
| Year Two | $36,050 (+ $1,050) | $39,655 (+ $1,155) |
| Year Three | $37,132 (+ $2,132) | $40,844 (+ $2,344) |
| Year Four | $38,245 (+ $3,245) | $42,069 (+ $3,569) |
| Year Five | $39,392 (+ $4,392) | $43,331 (+ $4,831) |
The difference is even more pronounced if you add up the five-year total.
| Starting Salary of $35,000 | Starting Salary of $38,500 | |
| Year One | $35,000 | $38,500 |
| Year Two | + $36,050 = $71,050 | + $39,655 = $78,155 |
| Year Three | + $37,132 = $108,182 | + $40,844 = $118,999 |
| Year Four | + $38,245 = $146,427 | + $42,069 = $161,068 |
| Year Five | + $39,392 = $185,819 | + $43,331 = $204,399 |
That $3,500 initial difference grows to $18,580 over the course of five years.
Remember that CareerBuilder research said that one-fourth of employers surveyed offer $5,000 (or more) less than what they’re ultimately willing to pay as a first offer. That’s less than the 10 percent difference in this example. But even that small amount can make a big difference over the course of several years.
Do Your Homework
When you’re buying any major item (house, car, big-screen television), it’s important to do your homework and find out the value of the item. It’s also important to do your homework when negotiating a salary or a raise.
Research your market value — what you’re worth — for your position, level of experience, and industry. In addition to online salary sites, you can get information from your professional or trade association.
Research the prospective employer and its salary structure. If possible, talk to current or former employees. Alumni of your college or university who hold similar positions or who are employed by the same company may provide you with useful information. (LinkedIn can be a good source of contacts for this.)
