Should You Always Negotiate Salary?

Should You Always Negotiate Salary?

Should You Always Negotiate Salary?

It’s an age-old question for most candidates—should I negotiate my salary? For most potential new hires, the question feels scary. 

More than 50% of employees report feeling very uncomfortable with the idea of asking for money so they avoid the discussion altogether. Nearly 50% of employees say they don’t negotiate because they’re worried an employer will rescind their offer (find out the real reasons employers rescind their offers here). And just below 40% of employees say they are unwilling to negotiate a salary offer because they don’t want to look greedy. 

While fear, perception, and concerns about not getting the job are all valid reasons for avoiding a negotiation discussion, what most employees don’t realize is the serious impact not negotiating can do to your lifetime earnings. 

Look at the difference between a $100k salary and $130k salary over the course of just 5 years: 

Infographic - Should You Always Negotiate Salary - FairComp

When new hires leave money on the table by not negotiating their initial salary offer, they don't just leave $5k, $15k, or even $30k behind. They leave years and years of potential compounding salary raises and negotiation in the dust. Over just 5 years, a $100k salary that could have been negotiated up to $130k leaves $204k on the table. That’s a huge amount of money to walk away from just because you’re uncomfortable initiating a salary negotiation. 

Some experts believe that the cost of not negotiating your initial salary offer—especially right out of college—could cost candidates between $1 million and $1.5 million. And those numbers don’t account for the retirement savings that could have been earned on higher base salaries. 

The impact of not negotiating 

Lower base salary

It’s clear that when you don’t negotiate an initial salary offer, your base salary suffers. For most people, that can look like an initial 3 - 5% they’re missing out on in the first job they take. Compound that number against all other future raises (typically based on your current salary) and job offers (too often based on what you’re already earning) and you can expect a lower base salary compared to your peers who negotiated from the beginning. 

Lower bonus potential 

Negotiating a higher base salary isn’t the only play for new hires. Negotiating a higher bonus can bring in more earnings. But when you don’t negotiate—or you run into problems negotiating your base salary—your bonus potential will suffer. And just like your base salary earnings, when you start off at your new job with a lower bonus, making up time or trying to get a higher percentage bonus is a battle that’s harder to win when you’re already doing the same job for less. 

Lower retirement savings 

By forgoing a base salary negotiation, you aren't just leaving a higher annual wage on the table—you’re walking away from potential retirement savings that could be growing every year. A lower base salary means less money to contribute to retirement and it means a small employer match on those earnings. 

Why you should always negotiate

Most employers are willing to negotiate. 

While it can be nerve wracking to approach a negotiation discussion with a potential employer, there’s good news. Most employers actually expect you to negotiate—and they are willing to have the conversation. In fact, 75% of employers are willing to negotiate. The odds are in your favor—a 75% chance that your negotiation conversation will result in a higher salary for you. (Tips for negotiating are below!)

Take advantage of more negotiation experience. 

When you stack the number of times a potential hire gets experience negotiating against the HR team or hiring manager that’s part of the discussion from the employer side, it’s clearly lopsided. Recruiters and hiring managers get the opportunity to negotiate dozens of times a month while employees typically only change jobs 5 - 7 times in their career. This reason alone means that you should take every opportunity to hone in your negotiation skills—counter your initial offer—and get more experience negotiating so you can get the salary you deserve. 

Most companies come in low on their initial offer. 

It’s no surprise that employers will always try to get the best talent for the best price. And you can expect that most employers will always have the company’s best interests in mind when they make an offer to a potential new hire. Because of this, you can assume that the employer has some wiggle room in the initial offer (again, because 75% of employers expect you to negotiate). You won’t see those additional dollars if you don’t ask.

Employers make offers based on unemotional decisions. 

Applying, interviewing, and accepting a new job is an emotional experience for any employee. Your job often defines who you are, how you live, and the way you can take care of the people that depend on you. But for employers, offering a candidate a new role and salary is an unemotional decision. They look at employer-only data to figure out the best salary offer (so they can get the best talent for the best price) and expect that there will be some negotiation on the initial offer. The best advice? Look at negotiation as part of the job interviewing process—step outside of the emotions of finding a new job and just look at the logistics of getting a higher salary. 

Core tips for negotiating your next salary offer

Ask for time to review the salary offer. 

The first tip in any salary negotiation is to always ask for time to review the offer. Don’t try to negotiate in the initial call or conversation—ask for 24 hours to review and think about the offer. Always show gratitude and excitement and be polite, but ask for a day to collect your thoughts. This isn’t a red flag for the employer—they expect you to think about the offer and asking for one day won’t show any disrespect. 

Keep your target salary range to yourself. 

Even though employers aren’t legally allowed to ask you about your salary range (in most states), many recruiters are skilled at getting around this rule by asking about your target range. What they’re hoping to get from you is the salary you’re most likely to accept—and when you give a range, they’ll offer at the low end of that range. Instead, keep this information to yourself. You can say you’re still doing research on the market value of the role you’re interviewing for, you’re sure you’ll get to the right number together if this is the right fit, or that you’d prefer not to answer. (Find more tips on how to avoid the salary range question here.)

Understand how the new role is categorized or leveled. 

During your interview process, ask the recruiter or hiring manager how the position is categorized or leveled within the company. This information (finding out if it’s a level 2, 3, etc.), combined with information about the company’s compensation philosophy (do they pay at the 50th percentile? The 70th percentile?) can give you a good clue about how they will position your initial offer. This information can also help you know if you receive an offer at the top end of a salary band. If you start at the high end of the salary band, it might be harder to get a raise in the next year—you’ll need to make the case for adjusting your role to a different level down the road for a higher salary.

Use accurate salary data. 

When it’s time to present a counteroffer to the employer and negotiate higher than the original salary, set yourself up for success by using accurate salary data. Employers have access (and pay thousands of dollars) for salary reports that vet employee salaries all over the country. These reports serve as a guideline for employers on how much each role is really worth (and what other companies are really paying). Most candidates arm themselves with public salary data that’s unverified and provided by peers with plenty of reasons to not report accurate numbers (fear of their employer finding out they’ve posted their salary, elevating their title and salary, etc.). Instead, use verified compensation data. (FairComp is building the first ever, verified salary data list for candidates who want to be paid fairly. Get on the waitlist to get access.)

Consider negotiating with an anchor high strategy.

When you use the anchor high strategy, ask for 10 - 20% more than the number you want to accept. More often than not, the employer will come back with a number that’s lower than 20%, but if you’ve gone higher than what you expect, you’re likely to see a number that’s close to what you really want. For example, if the initial offer comes in at $100k and you counter at $120k, but you would be happy to accept $110k, the employer will probably meet you at that $110k number. Everyone walks away from the negotiation viewing it as a win-win. 

Use a best and final negotiation strategy. 

In the best and final negotiation strategy, you present the employer with a single number and rely on time as your co-negotiation companion. For example, the initial offer might come in at $100k, but you want to see $110k to accept the offer. In your response to the recruiter, let them know you’re so excited about the role, you want to start as soon as possible, you know you can make a huge impact (based on your experience and previous wins), and you need to see the base raised to $110k to accept the offer. If that number can be raised to $110k today, you can sign the paperwork and get started ASAP. This approach can speed up the negotiation and help you get a signed offer quickly. 

Negotiate more than base salary.

Don’t forget that your offer has more to negotiate than a base salary. If, in the 25% chance the employer is unwilling to negotiate your base salary, come back with possible counter offers on RSUs (restricted stock units), PTO, ISOs (incentive stock options), flex work time, your annual bonus, a signing bonus, or other perks. Look at everything in the offer and consider each line item negotiable (and try to get as much as you can in the areas that will make an impact over time—a higher bonus percentage, retirement match, etc.).

Be kind and grateful for the opportunity to negotiate. 

The number one tip for negotiating salary—outside of always negotiating your offer—is to do so with kindness and gratitude. Without showing respect and appreciation for the opportunity to talk through the job offer, employers will see a red flag. In negotiation conversations you are still interviewing for the role. Share how excited you are about the role, what you can do for the company, and be clear and direct when you negotiate for a higher salary. 

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