What exactly is a salary negotiation?
A salary negotiation is a dialogue between an employer and an employee to resolve points of difference pertaining to the salary.
While other aspects of the compensation, such as benefits or work hours, can also be included in the negotiation, both parties are primarily concerned with the salary. That’s why, we’ll also focus on the salary as well.
In this article, we will aim to develop your following salary negotiation skills.
The 3 Key Elements of Salary Negotiation
- Communication: Effective communication skills are essential for success. You’ll need to articulate your value proposition, express your expectations, set boundaries, and address any concerns or objections raised by the employer. Clear and concise communication wins the day.
- Preparation: Thorough preparation is key to successful salary negotiation. You must be informed about industry standards and market rates, assess your own worth objectively, and identify your desired salary package. Being well-prepared helps you become confident and credible.
- Persuasion: Persuasion skills are the crux of the matter. They are crucial for influencing the employer’s decision and convincing them to meet your salary expectations. You must present compelling arguments, provide evidence to support your case, highlight your value, and address all objections. The tactics are endless and there are many advanced persuasion methods. That being said, all you need are the basics for a successful salary negotiation. They are simple to master, and we’ll help you do so below.
Understanding the Importance of Salary Negotiation for a New Job
Salary negotiation for a new job is crucial for maximizing your earning potential. It is one of the most important conversations you’ll have with your employer, and it pays to be prepared – literally.
Despite the fact that practically every element of a salary negotiation can be prepared for, and even roleplayed, fewer than half of recent graduates even attempt to negotiate their salaries.[1] This is also ironic, since the average payoff associated with asking for a salary increase is found to be $1500 – and that’s just for recent graduates![2]
It pays to ask. And if you’re prepared, it can’t go wrong.
Upon receiving a job offer, if you negotiate your salary effectively, you can get a competitive compensation that aligns with your skills and experience. You may even get an extraordinary package.
On the other hand, if you fail to negotiate your salary well, you can get stuck with an unfair or sub-par compensation package that not only underpays, but also limits your further career development.
The bottom line is, you need to treat salary negotiations as a regular and ordinary part of doing business. It’s just like getting dressed to go to work or brushing your teeth. It’s routine.
How Do You Smartly Negotiate Salary?
The #1 rule of salary negotiation for a new job is to be prepared and informed.
You must arm yourself with knowledge about industry standards and market rates. This allows you to approach negotiations strategically and smartly.
By being informed, you know when to recognize you’re getting a good deal, and when you’re being low-balled. When you’re informed, you can be assertive and tactful as needed, without being perceived as rude or overly aggressive.
In order to negotiate salary without being rude, it’s crucial that you’re informed.
Remember: Uninformed negotiators make bad negotiators. When uninformed, people can misinterpret the situation, be overly aggressive, overcompensate in their asks, and on the extreme, even ruin professional relationships.
Assuming you’re informed – which you are going to be because you’re smart – you must also leverage effective negotiation tactics and maintain professionalism throughout the process.
Finally, you must realize that you’re not trying to bully or coerce the other party. You are trying to find a mutually agreeable, win-win outcome.
Here are the steps you should follow to effectively negotiate your salary after receiving a job offer:
Step 1: Preparation – Setting the Stage for Successful Negotiation
It pays to be prepared.
You should start by looking at the job title as well as the job description, and research publicly available salary information for the job you’re going after, as well as comparable jobs.
Using this pay information, build a range. When building this range, factor in your credentials, your years of experience, and the brand recognition of the company.
Let’s say, for example, you’ve researched your market and discovered that your range is between $65k to $95k. Are you done? No… You’re just getting started.
Once you have your range, you need to consider market conditions, as well as the conditions of the employer you’re negotiating with.
For factoring in market conditions, you need to focus on the supply/demand environment of the role. Are there many open positions? Or are the positions few and far in between? Does it take only a few weeks to hire a new employee? Or does it take many months, even years to find the right fit?
For factoring in the conditions of the employer you’re negotiating with, look at their open positions. Try to learn how long the specific position you’re negotiating for has been open. How many other candidates are in the pipeline? How urgent is the project you need to work on? Are there any deadlines the employer is beholden to?
Using all of this information you’ll decide whether or not it’s an employer’s market or an employee’s market. If it’s an employer’s market, you might want to lower your range. In our example, this might mean changing your range from $65k-$95k to $60k-$90k. If it’s an employee’s market, you’ll want to raise your range. Perhaps go to $70k-$100k.
We recommend a 10%-25% shift, depending on your industry and the market conditions.
We’ve seen employer’s pay 200% finder’s fees to headhunters during some employee markets. And in some employer markets, a 50% lower pay for the same title is not inconceivable. But these are exceptions and not the norm, and you need to figure out the specific range for the jobs you’re going after for your industry.
While there are some salary comparison tools or services like Glassdoor, Google should be your starting point. You may also read some of our industry reports to get some raw numbers. You want to set realistic objectives. But you also want to give yourself some breathing room and as Harvard Business School states, “be ambitious”. [3]
Step 2: Strategy – Developing a Negotiation Strategy
Once you have your market adjusted range, you need to consider your career objectives.
Is this a foot in the door job? Perhaps your strategy needs to be to get anything within your range.
Do you have many options? Maybe you need to try to get the upper limit of your range.
The boss you’re going to work for seems like trouble? Perhaps you should move your range up by another 5%.
Is the benefits package unbelievably good, and you get an extra week off? Factor those in, and be open to accepting a lower offer.
Whatever specific situation you find yourself in, after you’ve informed yourself with the lay of the land, you MUST decide on your negotiation strategy PRIOR to the conversation.
Here’s the key: When you know how you’re going to respond to each number, it takes all the thinking, all the worry, and all the nerves out of the situation. It also makes sure you don’t accidentally say something wrong or come across as rude.
Decide on what you’re going to say if they hit your range, if they are above your range, or if they are below your range, for that specific job offer.
Step 3: The Offer / Counteroffer Cycle
Once you’ve been given the job and a number, depending on where it falls in your range, it’s time to respond.
Luckily, you’ve already laid out your strategy, and you know exactly how to respond to each situation. But let’s go over them one by one…
Is the salary over your range? Take it!
Sure, there are arguments for asking for even more. There are also counter arguments against it. Either way, you’re getting paid above your expectations and you should celebrate!
Is the salary in your range? Also take it.
In this case, you have more of a reason to ask for a little more. But in case you do, you should be cognizant of why you’re asking for more, if you happen to ask for more. As you’ll learn below, an counteroffer is not free. It has a cost.
Is the salary under your range? Make a counter offer.
And how exactly do you make a counter offer?
After analyzing the initial offer, and evaluating the entire compensation package, if you’ve decided to ask for more… Well… You ask for more!
Going with our example from above, let’s say that you’ve had a range of $65k to $95k, and you’ve been offered a job that’s only $60k. You might want to counter that with:
“While I appreciate the initial offer of $60,000, based on my experience, skills, and market research, I believe a salary range of $65,000 to $95,000 is more aligned with industry standards and my qualifications. I am confident that [my expertise and contributions] will bring significant value to [Company Name], and I am excited about the prospect of working together. I am open to discussing the details further and finding a mutually beneficial solution.”
A couple of crucial observations:
- No need to figure out a new range, think “what should I tell them to get X”, or worry “if I say 65k to 95k, they can just pick 65k… maybe I should say 75k… don’t want to miss out…”. Stop. This is not the time to think. This is the time to act. You already figured out your range. Just give them your range. Take the thinking out of it.
- Be specific about your expertise and contributions and what value you will bring to the company. Don’t just read the example above verbatim. Don’t say “my expertise and contributions will help your company”. Say something like: “my 7 years of luxury sales experience and expertise in selling super yachts will surely grow your business”.
- When you counter, you are refusing to take the job at the rate offered. The power of the negotiation comes from your refusal. Don’t ignore this fact.
- Worst case, they can say “take it or leave it” and see if you cave. You can say “no harm in trying” and just take the job.
- Best case, they will give you something within your range. Everyone is happy.
- It is highly unlikely that the employer will take the offer off the table, but it can happen. If you’re very concerned about that, you can soften your language by making a statement like “I was thinking more of a salary range between $65,000 to $95,000, what do you think?” where you don’t refuse the job, but only point to disappointment with what’s offered. It can work too, but it is not as strong. Moreover, there is no guarantee that the employer won’t interpret this as refusal in the first place, get offended, and redact their offer. Humans are irrational creatures.
- There may be multiple cycles of offers and counter offers. Giving a range, rather than a number, reduces the likelihood of such cycles.
There are many additional techniques to consider such as “structuring your value proposition”, strengthening your argument by highlighting your “unique selling points”, as well as advanced techniques like “rapport building”, “yes ladders” or “nibbling”. You can explore them through our resources, but they can also distract from the core of the matter.
Master the core of the matter first!
And what exactly is that core matter in salary negotiations?
The core of the matter in salary negotiations is power. It’s you expressing your power to walk away, and the employer expressing their power to pay for your services. Whichever party has greater power in the situation gets their way. The only room for movement is in the level of tolerance of the party with greater power.
Once you understand and internalize this fact, negotiations get much, MUCH easier…
Ultimately, if you’ve done your homework, picked up your range, decided on your strategy, and countered according to your plans, you’ll have done everything in your power to maximize your compensation. And that is a good thing!
Pro Tip: If a recruiter or a manager asks you about your salary expectations before they give you an offer, this can be a bad sign. It is often said that “whoever gives the number first loses”. There are many ways to handle this situation, which you can find out about in Launch Your Career.
Step 4: Contingencies
In most cases, salary negotiations go fine. Both parties usually expect some negotiation to take place, and both parties are usually prepared for it.
On occasion, you may experience rejection or push-back. This can take in the overt form of your counter offers being rejected, as well as some passive aggressive forms such as delays in communication or pretending your counter didn’t take place, with the employer just making the same offer again.
If such friction occurs, it is important that you maintain a positive outlook and a professional attitude. You need to know when to walk away and when to proceed.
Always come back to the basics. Be courteous and respectful. Be clear in your communication. Stick to your range and your principles. Always pay attention and recognize any red flags or warning signs.
Here are the top warning signs and red flags you should watch out for in job negotiations:
- Lack of transparency: Evasive or vague when discussing salary details or refusing to provide clear answers to your questions. Ambiguous compensation packages. Any kind of “we’ll discuss it later” despite the offer being made.
- Resistance to discussion: Reluctance in engaging salary negotiations altogether, or shutting down the conversation prematurely. This may mean that they are not open to considering your salary expectations at all.
- Dismissive attitude: If the employer dismisses your concerns or requests without offering valid reasons or explanations, they may not be taking you seriously.
- Pressure tactics: If they use ultimatums, deadlines, or threats to coerce you into accepting their initial offer, it may indicate a lack of respect as well as a host of other more serious problems.
- Hostile demeanor: If the employer is unprofessional, displays hostile or confrontational behavior during negotiations, such as using derogatory language, raising their voice, or making personal attacks. This indicates a toxic work environment.
- Inflexibility: If the employer refuses to budge or compromise, even after you’ve presented valid reasons or evidence to support your requests, they may not be negotiating in good faith.
- Lack of follow-through: If the employer makes promises during negotiations but fails to follow through on them afterward.
If you experience any of these warning signs during any part of your interview or negotiation process, you should get to the bottom of it, and think twice about working with that employer.
Assuming you don’t experience any of these red flags, if your counter offer gets rejected, that doesn’t mean the end of negotiations. As we expressed earlier, sometimes there can be multiple cycles of offers and counter offers. You have options.
If your counteroffer gets rejected, here are some things to consider:
- Seek Feedback: Politely ask for feedback on why your counteroffer was rejected. Understanding the employer’s perspective can provide very valuable insights. Sometimes there is good justification behind their choices and your position can shift.
- Reassess Your Position: Take some time to reassess your expectations and decide if there is room for compromise. Consider your qualifications, the company’s budget constraints, and market conditions to determine if your initial counteroffer was realistic. It’s worth considering the fact that, if you are not open to compromise, you are not negotiating in good faith. Sometimes, you may need to compromise. If you are unsure, it may make sense to get a third opinion from an unbiased party.
- Consider Non-Salary Benefits: Perhaps you can explore alternative forms of compensation such as additional vacation days, flexible work hours, work from home arrangements, working only 4 days out of the week, professional development opportunities, or performance-based bonuses.
- Keep the Door Open: You can walk away from a deal breaker. Even if you walk away, however, keep the lines of communication open with the employer. Express your continued interest in the position and your willingness to work with them at a mutually satisfactory offer.
Addressing Common Concerns with Salary Negotiations:
Let’s look at the key apprehensions individuals encounter during the salary negotiation process, and address each of them individually.
Negotiating salary can feel awkward for some, but it’s a crucial step in securing fair compensation. The more you practice, the better you get at it and the less awkward it feels. If you have serious concerns about feeling awkward, roleplay with a friend.
Negotiating salary is not rude; it’s a standard practice in the job market.
Salary negotiations can take anywhere from a few days to several weeks to reach a resolution. It depends on the position. It is safe to expect a minimum 24 hour turnaround for each offer/counteroffer cycle.
It depends. If it falls within your range, and the market conditions are not in your favor, there is a good case to be made to accept the first offer. Making a counter offer has a cost because it introduces friction.
A 20% counter offer may be considered too much in some situations, depending on the industry, the level of the position, competitiveness of the field, and the company’s budget constraints. Typical counter offer is between 5% to 15%, but there are vast differences across industries. Research your industry.
If you’re making a 20% counter offer, we recommend justifying your ask with tangible benefits of hiring you, as opposed to hiring someone else.
On paper, there is no limit. In practice, most negotiations for a salary increase end up between of 5% to 20% above the initial offer.
The exact same way you respond to an offer below your range: make a counter offer, professionally, politely, and decisively.
A counteroffer salary that exceeds 20% to 30% above the initial offer may be perceived as too much in many cases. Typical counter offers fall between 5% to 15%, but this number varies dramatically across industries. Research your industry.
If the initial offer meets or exceeds your salary expectations, and you feel satisfied with the compensation package, you do not need to negotiate.
You can politely communicate that the salary offered is below your expectations by expressing gratitude for the job offer and then diplomatically presenting your preferred range.
Negotiating over email is easier, but it makes it difficult to use advanced techniques like “building rapport” or “yes ladders”. Negotiating over the phone or in person enables more capabilities, but it also requires more preparation. Whether you negotiate over email, phone or in person, write down your counter offer before presenting it.
Most employers expect you’ll negotiate. It’s a standard part of the recruitment process. In some situations, not negotiating may be perceived as a negative (i.e. imagine being a sales professional who doesn’t negotiate).
It depends on your industry. The Internet seems to think 10% to 20% is a good number. Reality depends on the competitiveness of your field, your options, your company’s options and the current market conditions. Research your specific situation.
According to the U.S. Bureau of Labor, the average annual salary in Q4 of 2023 was $59,384.
It depends on the job. It’s above the average annual salary in the US and what is expected from you. A better question to ask is: “what is the salary range for this title?”
It depends on the industry, and the current market conditions. What is a decent salary in one year, may be appallingly low the next year. Remain aware of your industry trends.
In our network, we consider the definition of a high-value job as the litmus test of a decent salary, which is defined as a job where you can earn at least 2x above the average income (at least $118,856).
You can. But it is recommended to leave the salary negotiation after the interview has concluded and you’ve received an offer.
It depends on the company. In some companies HR decides pay scales. In other companies, hiring managers and various executives have full control. It is imperative that you treat everyone who interviews you as if they have control over your salary, until you are made an offer and are negotiating. This attitude protects you.
You should consider countering a salary offer when you believe that the initial offer does not match the value you bring to the role. By researching your industry and identifying your salary range ahead of time, you’ll know whether or not to make a counter.
It’s uncommon, but there is a possibility of losing a job offer by negotiating salary, especially if the negotiation is mishandled. Keep in mind, part of your power comes from your ability to walk away, and you may need to be ready to walk away to negotiate effectively.
Using a salary negotiation template can be helpful as a starting point, but it’s not required. Understanding how salary negotiations work, and researching the specifics of your industry, is much more important than following a template.
Males and females tend to attempt salary negotiations at a similar rate, although females also report experiencing inequality.[4]
Final Thoughts on Salary Negotiations
Celebrate your successes and learn from your mistakes.
While the logical part of salary negotiations are pretty straight forward, the emotional journey is its own learning experience and an avenue for wisdom. It’s easy to think about how you’d deliver a counter offer. It’s a completely different experience to actually deliver it in person.
We highly recommend going through emotional tribulations to develop fortitude as well as wisdom. Which is also why we highly recommend negotiating your salary, when you have the opportunity, purely to gain the experience and develop as a professional.
Your mileage may vary. But if you follow our instructions – and do your research – things will likely work out in the long run.
Remember: If you’ve been made an offer, the employer WANTS to work with you. Salary and the compensation package is important, but they are also mere details – especially for the type of positions we prepare you for. What really matters is the value you will create by working together with your new employer.
If you focus on that value, things tend to work themselves out naturally.