When it comes to money, put yourself in the best position to negotiate a compensation plan that works for you.
When there is a job offer on the table, it’s time to negotiate a compensation package. The company is investing time and resources in securing you as the candidate of choice. They have made this investment because they think you will be an important part of their team.
The employer is willing to make this investment in you because they think you have the potential to become a great employee, or an employee that will be able to deliver on what you have promised during the interview process. The negotiation game is very tricky, so you need to go in knowing what questions to ask in order to put yourself in a good position during the discussion. Consider these guidelines for more effective negotiations.
Find out what you are worth. It’s almost a guarantee that the representative negotiating the terms of employment on the company’s behalf knows the market value for your skills and experience. When negotiations begin, you should also know how much your work is worth. Using a few sources including the internet, do research on the salary and compensation ranges for comparable jobs in your geographic area. When researching these sources, take into account the cost of living differences between cities, especially if you are considering a position out of state.
Set a clear goal and objective. Many people who negotiate salaries really don’t have a game plan or even know how to execute it, and as a result most people are not getting what they are really worth. Those who set clear and aggressive goals achieve more favorable results than those who aim low or do not set goals at all. If you want $50,000 a year, shoot for $60,000 to $70,000 and you’ll be in a stronger negotiating position.
Set a minimum acceptance price. You should know your own financial obligations and responsibilities prior to accepting a position. If you know that you cannot take anything under $55,000, it makes no sense to accept the position. You should be able to decline an offer if it doesn’t meet your financial needs. You should also take into consideration other factors of the offer, like any alternative options prior to accepting the offered position. If you are currently making $45,000 a year and there are no other offers on the table, settling at the same amount or just a slightly higher amount might not be a bad idea.
Strike a fair balance. Obtaining a compensation package that both you and the employer consider fair is particularly important since you are entering into an ongoing working relationship. If three months into your new job you discover that you are making 25% less than your counterparts, your enthusiasm for your new job can quickly diminish. On the other hand, if your employer feels like you bullied him into a costlier package than the company authorized him to offer, he or she could easily become resentful toward you.
Are you worth more than most people because you have more experience or because you have a long track record of attracting large clients or managing large projects? You must be able to make a strong business case for why your self-serving version of fairness is appropriate. Perhaps the rationale for your standard of fairness has little to do with you personally, and everything to do with asking for the market value of your work. Maybe you are asking for a salary that is commensurate with others performing the same role in the company or in the industry. It is helpful for you to identify what your employer considers fair, because you and your potential employer might be far off on a potential salary number. Remember: If your negotiating counterpart makes concessions, they need to be able to justify their concessions to their boss.
Identify all your interests. Both you and your employer probably have concerns or aspirations that are not strictly monetary. You might want to negotiate one or more flex days per week, for example, or have the ability to work from home a few times a month if you have to pick up or drop your children from school.
When you walk into the negotiation, prioritize your interests and identify areas where you are willing to trade one thing of value for something else. Is the salary more important than stock options? Is a health club membership more important than a likely promotion in six to twelve months?
Negotiating terms of the deal are very important. Discovering what your employer’s interests are will benefit you. Maybe the employer has some budgetary constraints and cannot go to the number you initially asked for.
It’s good to know if the negotiator has full decision-making capability or if they are representing someone else who makes the compensation decisions. It’s likely that the potential employer may be able to offset a concession on your part by paying for your education, association fees, stock options, membership fees, or if the negotiation goes well, maybe a signing bonus. Remember to be creative and keep all of your options open.
Be competitive but allow room for negotiation. It’s possible that the negotiator will be aggressive, brisk or stubborn, but keep your cool and stick to your game plan. If you encounter a negotiator who wants to play hardball, respond strategically. Don’t allow yourself to get baited. Remember your goals, and why your requests are fair. Only volunteer information that will strengthen your position. If your counterpart makes a concession, it is important that you also appear cooperative. You might need to make a concession as well.
Negotiation is an important part of the communication process. It’s composed of research and strategy.
In the research stage, gather as much information as you can about your skills, and the company’s values and needs. In the strategy stage, use your enthusiasm as a major negotiating technique. When you show energy and a positive attitude, it’s hard for any employer to be disinterested in you.
Negotiating Your Compensation Package
Rule #1 in salary negotiations: Do not discuss your specific compensation package with the employer until you have been offered the job, and one in which you should seriously consider.
During salary negotiations, you are not only talking about your monetary salary, but your entire compensation package. This includes vacation time, personal sick leave, health insurance, tuition reimbursement, and 401K.
Your base salary and performance-based raises are probably the most negotiable parts of your compensation package. Many companies allow you to select from a number of benefit options based on a total monetary cost.
In other words, the company will spend a certain amount of money on each employee for benefits, and employees have some flexibility when choosing benefit options that are best suited for them. For example, employees with children might consider child-care reimbursement benefits, while other employees interested in going back to school might choose tuition reimbursement. Before you begin negotiating your compensation, decide which benefits are most important to you. When you are dealing with a compensation package, consider all the benefits the company has to offer, not just the salary.
As with any other part of the job search process, the key to salary negotiations is preparation. It is very important for you to do your research before you begin. In order to determine the salary you are willing to accept, investigate the salary range that someone with your skills and experience can expect to receive.
How do you find salary information?
What about other salary and benefit information? Wait for the employer to introduce these subjects. Some companies will not talk about pay until they have decided to hire you. In order to know if their offer is reasonable, you need to find out what a rough estimate is of what the job should pay.
Try talking to family, friends, or acquaintances who were recently hired in similar jobs. You can look at help-wanted ads in newspapers, internet career websites and even do looks-ups on search engines and the list of sources mentioned above. At the time of the offer, you must understand exactly what benefits are offered, what they cover, what deductibles (if any) apply, and whether there are any co-pays for office visits, emergency visits and prescription drugs.
It’s important to learn the organization’s policy regarding overtime. Depending on the job duties, you might or might not be exempt from laws requiring the employer to compensate you for overtime. Find out how many hours you will be expected to work each week and whether you will receive overtime pay or compensatory time off for working more than the specified number of hours in a week.
Take into account that your starting salary is just that, a starting compensation. Your salary should be reviewed on a regular basis. Depending on the role or position you are in, it may be reviewed quarterly, semi-annually, or annually.
How much can you expect to earn after one, two, three or more years? It is hard for employers to gauge pay increases like commissions and bonuses over a period of time, because they have to consider many factors like the state of the economy, years of service, and most importantly your performance. If you do not expect to get commissions or bonuses, a general rule of thumb is that if you are entitled to a pay increase. Typical salary and general compensation raises range from 5% to 10% annual. This range is pretty common, but it could go higher based on your contribution and value to the company.