Whether you’re asking for a pay rise or starting a new job, it’s common to feel uncomfortable when negotiating your salary. And yet it’s an important part of the hiring process, one that won’t lead to offers being rescinded. In fact, not negotiating can be a mistake and you could be leaving anywhere between 10-20% more money on the table. On top of that, you could end up feeling undervalued. This article provides tips for you to consider before, during and after the next time you negotiate your salary whether it’s for a pay rise or a new job.
In this article you will learn:
- What to consider when negotiating a pay rise in your current job
- How to handle rejected requests
- What to do when negotiating your salary for a new job
- Questions you should ask
- Common mistakes to avoid
Collect two types of ‘evidence’
First and foremost, always keep track of notable work/results. Over the course of your time at the company, create a list of your key achievements, and focus on the areas that are important to your line manager (and company). Examples of these include: money-saving efficiencies you have implemented, results from a project you’ve just overseen, positive customer testimonials, or praise from higher-ups.
The second type of evidence you need can be found using salary database sites or by having conversations with recruiters; to understand what the going pay rates are in your industry and for your job title or level. Think of this as an opportunity to give your manager the information needed to convince their boss or HR that you deserve a raise.
Look at the financial health of the business
Looking at the financial health of the business will help determine if it is the right time to ask and what might be considered ‘too much’. Monitor the company's trading performance (relative to budgeted costs and planned sales and profitability) and try to work out a realistic and appropriate request. Look at the company's position concerning staff turnover, retention, recruitment and head-count (ie. increasing, reducing, or static; in accordance with planned levels or not). Moreover, try to establish the available budget your company has for pay rises (which is usually none, apart from annual salary review time) and the company's last company-wide salary review, and the range of % increases awarded.
When and how should you ask?
So you’ve collected evidence and carried out your research, when and how should you ask? If the company has official reviews, this is usually the best time to bring it up. Point out the research you’ve conducted as well as your achievements, refer to your performance reviews and outstanding results. Make sure you have data that justifies and builds your case. Explain why you would be expecting a salary raise and provide a number. Keep in mind that it is a negotiation so perhaps aim higher than the number you would like within reason.
Discuss what the next steps look like
If you are successful and your manager agrees to a raise, be sure to confirm what the next steps look like. Will there be a follow-up meeting? Will you receive an email? Will you have to present it to a higher rank? Make sure you receive written confirmation and check that the number is what you agreed. Keep records/notes of verbal conversations so that they can’t then row back on promises or claims. But of course, make sure to be respectful and straightforward about this. You don’t want to give off an impression of suspicion.
Re-examine your expectations and find out what your manager’s concerns are
Take a step back and review your performance and contribution to the company that year. Have you met and exceeded all of your goals and expectations? If you ensured that you achieved all of your objectives and KPIs, then ‘no’ shouldn’t come as a surprise. You may not get the pay rise or promotion the first time around, but use this as a learning opportunity to find out your manager’s/company concerns. Don’t be afraid to ask a lot of questions, especially “What else can I do?” even if your score was exceptional. This shows that you’re always striving to grow and want to help the company excel, too.
Above all, it’s important to remain calm and collected so as to not create an uncomfortable working environment between you and your manager. It can be demoralising to receive a firm ‘no’ when asking for a pay rise, but you can turn a negative situation into a positive one by responding proactively. Organise a follow-up meeting with your manager to determine why you didn’t get a pay rise. It could be that there genuinely isn’t enough budget, so it helps to know whether or not your performance is the issue. If your performance is to blame, getting feedback is the first step to allow you to work on improving and showing progress for your next performance review.
Formulate a plan with your manager to ensure you are on track to get a raise in your next performance review. Make sure to list specific criteria and/or deliverables. Work closely with them to focus on the key priorities and ensure you check-in and monitor progress. Try to welcome criticism, look into taking on some training to add value to the business as well as your skill set and ask for the opportunity to get involved in a broader range of projects to grow and strengthen your experience.
Did you know: People who make a high first offer often get better results. This is known as the ‘Anchoring Effect’: the first piece of information in a negotiation acts as an anchor that influences the outcome.
Gather data on how much people in the role are usually paid in other companies or within your own and prepare a list with your reasoning for your desired salary. Having a good amount of information about the market, and not just your own situation, is helpful for employers and employees alike, and can avoid discussions centering on opinion or emotion.
Make sure you understand the difference between industries and company types. Of course, situations vary and industry averages are just a guide, but it's generally better to have some external perspective than to approach pay and earnings issues in complete isolation. For example, if you are moving from consulting to a startup/corporate you would usually take a salary cut. This is due to a significant difference in hours and responsibilities. If you move to private equity or big tech you would usually expect to see a similar or increased salary level.
Help them understand why you deserve what you’re requesting
Never let your proposal speak for itself. Avoid simply stating your desire for a 15% higher salary, explain precisely why it’s justified and the reasons you deserve more money than others they may have hired. If you have no justification for a demand, it may be unwise to make it. Practice your pitch before the actual negotiation. Find someone to listen to your proposal so you can feel the cadence of your speaking points out loud in a conversational setting. Be confident in your delivery. Bring conviction to the delivery of your pitch and in the negotiations that follow. It’s extremely important to hold your own when the moment comes.
"So what are your salary expectations?"
When pressed for your salary requirements, you should always be sure to offer a range based on what others in the field are earning, rather than a single fixed number. Make sure that prior to negotiations, you understand your leverage. Your negotiating power will vary depending on your current employment situation. For example, if you are unemployed and applying for work, expect to earn approximately what your old salary was or slightly less.
Avoid accepting the first offer
You do not need to give a prospective new employer a rushed answer as to whether you’ll accept their offer just because they'd like one. Generally, a good manager and employer will respect you more, and feel you are more valuable if they get the impression that you are in demand elsewhere. If you need time to evaluate an offer, say so. Schedule your next meeting 24-48 hours out and come back with your counteroffer. Remember that it is important to be gracious. If you’re at all worried about coming across as demanding or ungrateful, there’s a very simple solution to that: be gracious. No matter the outcome, be understanding, appreciative and thankful for the opportunity.
Don’t fixate on the base salary
Remember to consider all the components of an offer. These include annual bonuses, a sign-on bonus, equity, holiday, insurance and perks (e.g, discounted gym memberships). Sometimes, salaries may not seem like a lot but you should always take into account the other elements. Ask the question: “Besides the base pay, what other benefits are negotiable?” These can include stipends for tuition and training, paid leave, holiday time, moving expenses, perks, insurance and pensions. Make sure to look at the whole package holistically.
What to do if your counteroffer is rejected
Remember that it is your prerogative to ask, but sometimes there may be company constraints, for example, if there are more senior employees who are making less than what you’re asking for. Your request needs to align with the existing structure and hierarchy of pay. So don’t take it personally if they say no and cannot offer you more. This leads us back to the point above in looking at the bigger picture in terms of the whole package.
"How did you calculate this number?" By asking this question, you’ll be able to see if the number you’re being offered is a hard cap or a potential springboard for negotiation.
"What’s the outlook for salary raises or promotions?" Whether or not your salary offer is negotiable at the moment it's offered to you, it’s important to know what the future potential is for a pay rise or promotion.
"What metrics do you use to evaluate the success of employees?" This is an important follow-up question to ask in salary negotiations and, if you end up working for the company, this information will help the next time you’re back at the negotiating table.
"What is the criteria to hit the top percentile of the bonus range and how many people reached that level of bonus?" This will highlight your motivation to achieve top results and will also give you an indication of what you need to do to get there.
"Can I get the salary offer in writing?" Verbally settling a negotiation in your favour is great, but it doesn’t mean anything until it’s on paper.
Accepting the first offer
Research shows this is a common mistake among younger job-seekers and female job-seekers. This is due to not completely understanding the negotiation process or discomfort at the prospect of negotiating. As a consequence, you’ll earn less, receive a smaller raise and have a smaller pension. This may have an impact on your mentality towards the job.
Weak research and preparation
With access to a number of resources online it is essential that you conduct research on your prospective employer and the industry so you know your market value.
Making a salary pitch too early
Wait for the right moment to ask more specifics about salary, bonuses, commissions, health insurance and other perks. Asking at the wrong time may be perceived as being too focused on money.
Asking for too many changes in counter offer
If you decide to make a counter-proposal, you cannot negotiate every aspect of the offer.
Not asking for the final offer in writing
Ensure that once you have verbally received a job offer you find acceptable that it is sent to you in writing. No legitimate employer will have an issue with doing so and if the salary in the contract sent to you is lower than agreed this is a major red flag.