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Negotiating Salary and Benefits

Over 60% of new employees do not negotiate the terms of their employment. While there are some positions for which benefits (such as salary) are not negotiable, the vast majority of benefits can be negotiated.

If this is the case, why do so many new employees not attempt to negotiate their employment benefits? The reasons are generally understood to include:

  • Understanding Value – Employees may not understand the market rate for a professional with their skills. As such, they tend to attribute too little value to those skills.
  • Appearance – Many new employees are appreciative and do not want to create a negative impression on the employer by negotiating benefits. Specifically, they do not want to appear greedy or unappreciative.
  • Confidence – Many employees lack the confidence to confront a situation that they believe is confrontational in nature (though negotiation of benefits should not be confrontational). They believe that any level of negotiation could result in them losing the job offer.

In truth, if the negotiation process is handled correctly, the applicant should forgo negotiating based upon these reasons. Below, we take you through the steps of preparing for and successfully managing the negotiation process.

Steps in Preparing for a Salary Negotiation

Negotiation is more of an art than a science. Nonetheless, there are numerous structural elements that you can practice which will make you a better negotiator. These steps generally allow you to take a structured approach to the negotiation process. When negotiating employment benefits, those steps are as follows:

  • Determine What You Want (the Interests on the Table)
  • Determine and Develop Your BATNA
  • Set a Resistance Point
  • Determine the Employer’s BATNA
  • Determine the Employer’s Constraints
  • Develop Your Aspiration Points
  • Negotiate

Let’s take a look at each of these elements in greater detail below.

Determine What you Want

Many of us focus on Salary as the most important benefit when evaluating an offer of employment. While salary is undoubtedly important to most employees, it should not be the only factor considered. Generally, to perform well in a position, you will need to be engaged and motivated. Salary has not proven to be a good, long-term motivator. Other aspects, such as the nature of work, work schedule, reporting structure, colleagues, personal recognition, and many other employment characteristics have a much greater impact on contentment in a position. These external factors have the effect of meeting your internal needs. As such, you should identify the attributes of employment that may be negotiable. The negotiation process is your opportunity to attempt to align these attributes with your individual needs.

When you request a benefit, the company should be able to see how giving this to you brings them value as well. Prioritize the issues for how they best satisfy your interests. You will generally identify and add issues that were not included in an original offer into the negotiation. Below is a list of other types of interest:

Salary, Starting Bonus, Who is your Direct Supervisor, Job Assignment/Rotation, Travel, Moving/Relocation Expenses, Closing Costs on House Sale, Low Cost House Loan, Vacation (amount paid/unpaid; timing), Sick Days/Personal Days, Maternity/Family Leave (paid or unpaid), Flextime/Telecommuting, Educational Reimbursement Professional Training, Conferences/Professional Meetings, Car Allowances, Job Sharing, Home Office Equipment, Technology and Patent Rights

Determine and Develop your BATNA

BATNA is an acronym meaning, “Best Alternative to a Negotiated Agreement”. It is the most important concept in negotiation. It provides leverage and is a source of confidence in the negotiation and provides you with leverage when negotiating. When negotiating employment benefits, you must identify all alternatives to accepting the current employment offer. This generally means applying to and interviewing for other positions. Accepting another position for which you have an offer or starting your own business is generally the BATNA.

Generally, you want to be careful about revealing that you have other employment opportunities. It can look like a threat. You can, however, use it as a reference point or point of comparison for industry rate for compensation and benefits. Usually, it is better to do this through vague references without specifically mentioning the company making a competitive offer. Remember, to always express your ultimate desire to join the company with which you are negotiating. This helps reduce the appearance that the negotiation is competitive – rather than collaborative. It’s far better to frame it as, “I’m very excited to join the team. We simply need to negotiate the details to bring me on board”.

Also, don’t reveal your BATNA if it is poor (lower compensation and benefits). This provides very little leverage in the negotiation. It can also have the effect of supporting the employer in undervaluing you. If pressed to reveal other offers:

  • Don’t lie, but don’t look desperate.
  • Deflect

You may use a phrase like, “I’m still talking with other companies”. You don’t feel comfortable revealing those prospects since you are still waiting for an offer.

Set A Resistance Point

A resistance point or reservation point is the lowest acceptable offer that you are willing to accept before rejecting the offer and going with your BATNA. As such, you BATNA will be a strong influence on where you set your resistance point. Setting a resistance point is not always straightforward. You may be willing to accept less of one benefit in exchange for another. As such, it is difficult to set a hard line on what is the least acceptable offer. Many employees focus on salary. This is normally a poor idea, as other benefits can have a far greater impact on your engagement, performance, and contentment with a position. Nonetheless, it is important to set the resistance point before beginning the negotiation. It will help you avoid making rash or emotional decisions that you later regret (such as preemptively accepting an offer without negotiating important benefits).

Determine the Employer’s BATNA

Understanding the employer’s BATNA will help you better understand the leverage you possess and the employer’s willingness to negotiate benefits. Just as you are advised to generate alternative options to accepting the employer’s offer, the employer will likewise develop its alternatives to hiring you. That is, employers generally interview multiple candidates for a position. The employer will make an offer to one or more candidates and await acceptance before providing other candidates with an offer or notice that the position has been filled. Determining en employer’s BATNA can be difficult. It generally requires having strong information about the available talent pool for the position and the level of demand and priority the company has in filling the position. Some of this information you can determine by doing industry research. It’s always best, however, to attempt to find out specific company information. For example, if you know that the position has been posted for months with few applicants, the company’s BATNA is not very strong. If there is no shortage of skilled applicants for the position, the company’s BATNA is stronger. If you know a current employee with inside information, you may be able to ask them directly. Generally, when working with a recruiter, they will answer such questions. A hiring manager is far less likely to answer these questions fully.

Determine & Understand Company Constraints

Some positions do not offer the opportunity for negotiation. While it’s not always possible to determine the company’s constraints in negotiating benefits, you may be able to identify some constraints (such as starting salary and bonus) by industry and by the nature of the hiring practices. For example, a company that annually hires the majority of its summer interns may have a policy of offering the same benefits to all employees. In such a case, the company is constrained from negotiating benefits, as it would inevitably affect the other employees in some way. Another example might include the company’s budgeting process. If the maximum benefits (particularly salary) was the subject of a prior budget approval process, it may not be possible to go beyond the maximum budget. Once again, determine a company’s constraints is difficult. The surest way to understand a company’s constraints is to speak with a current employee. S/he will be able to provide you with valuable information. The important thing is to explore every option for uncovering information about the company.

Develop an Aspiration Point

The next step is to develop a target point to begin your negotiations. Your aspiration point(s) must be reasonable, realistic (but optimistic), and based on benefits offered in comparable positions (in the company and/or industry). This requires understanding your value in the marketplace. Some useful sources of information are LinkedIn (Salary info), Salary.com; glassdoor.com. You might also speak with employees at a competitor. If you don’t have any such connections, you may be able to find out salary ranges and benefits by looking at competitor job listings. Not, you can add extra value for special skills that may not be accounted for in these surveys (e.g., multi-linguistic, cross-cultural experience, other work experience, etc.) But, you can only add value if these skills are relevant and add value to the employer. The employer is not going to offer higher compensation or benefits for skills that are not related to the value you provide to the company. So, always be prepared to show how your abilities can add value to their company. Compensation and benefits should not be based on need or greed but on the value of your skills and performance.

In any event, there should be some room between your aspiration and reservation points. Focus on the entire compensation package – not just individual benefits. If the employer does not offer a given benefit or cannot offer that benefit at the desired level, you should have an idea of what other benefits you are willing to trade off for the benefit that is lacking. If your aspiration point is lower than the opening offer by the employer, you may not need to negotiate.

Negotiate

The negotiation process is generally a back-and-forth discussion concerning the benefits desired by the applicant and the constraints of the company. The employer will make the first offer of employment. This is known as, “anchoring”. It will generally contain one benefit – salary. As previously stated, this is not the only employment benefit that you may wish to negotiate. You need to identify your aspiration point for all of these benefits. These will make up your counteroffer to the employer’s opening offer. I cannot stress enough how important it is to identify and bring up all of the important benefits in the negotiation. As we will discuss further below, you do not want to deal with the various benefits individually. You will negotiate them collectively, using specific tactics to determine the employer’s preferences.

Add Value Through Logrolling

Logrolling is a negotiation tactic in which you bundle interests together and trade off between interests to learn more about how important each interest is to the other side. If you identify interests that are important to one side, but not as important to the other, this is a prime opportunity for trading off less of one interest for more of a different interest. For example, assume that the start date is very important to the employer but not the employee. At the same time, relation expenses are very important to the employee but not the employer. You can trade off these interests to the benefit of both parties. Restated, you are trading low priority items for high priority items. The most difficult part of this is comparing items with monetary value to those with convenience value. As a practice tip, avoid creating false items (red herrings) to trade-off for more important items. It can appear disingenuous or deceptive if the other party finds out that you are not being truthful about the value of an interest to you.

Establishing a Path for Achieving Desired Benefits

It may be that you are unable to negotiate compensation or benefits that match your aspiration point. That does not mean that your desired benefits are out of reach. You may be able to establish a path for getting to your goals. For example, you might agree to the salary and benefits offered with the provision that if you meet certain benchmarks, your salary will be raised to those in a comparable position. Generally, this happens by negotiating specific review periods and performance criteria. You get buy-in from your employer at the outset. You establish the ability to prove your value to the company. One important note is to always get this arrangement in writing. People’s memories are not always the best, and people above you may be promoted as well. If your employment agreement lays out your performance objectives, then you have a standard to meet and evidence that you are entitled to promotion or escalation of benefits.

Enlarge the Shadow of the Future

When negotiating compensation and benefits of a job, it’s important to not lose sight of your ultimate care objectives. Sometimes, a job is primarily a stepping stone to where you ultimately wish to be. As such, it may be necessary for you to accept a position that does not reflect the value you bring to the company. The most common scenario in which this happens is when you are changing career fields. Suppose you may have a wealth of skills in a particular industry or career field. However, you want to expand your abilities by working in another career field. You may not command the same compensation or benefits that you would command in your career field. For example, an individual working in the legal field has aspirations to be a company CEO. In her current field, she receives high compensation and many benefits. She realizes, however, that most CEOs come from accounting or operations. If she were to pursue a position in one of these career paths, the immediate compensation and benefits would be far lower. She is, however, taking a step to enlarge the shadow of the future.

Additional Tips – Frequent Issues

How do I know if the company is willing to negotiate?

First, you can do outside research on the company. The best way is to talk to a current or former employee. If you are working with a recruiter, you can directly ask her whether compensation or benefits are negotiable. Also, watch for signals that the hiring manager is willing to negotiate. An example would be, “why don’t you look over the offer and call me if you have any questions”. It is acceptable to ask your manager whether parts of the contract are negotiable. It is extremely rare that a company will not negotiate any part of your employment offer.

  • Note: An unwillingness to negotiate and rude behavior may foreshadow the work environment.

When do you Start Negotiating?

First off, you never begin negotiating any aspect of employment until you are offered a position. Any negotiating of compensation or benefits before that can be (and usually is) poorly received. Once you receive the offer, ask “when do you need an answer”. Generally, proposing a 48 hour period is acceptable to “discuss things with your loved ones”. During this time, you have the opportunity to calm your emotions, evaluate the offer, research the existing benefits, formulate questions to ask, plan on how to negotiate desired interests (if necessary).

With whom do you Negotiate?

Negotiating with the hiring manager is best. She will work beside you on a daily basis and is more vested in getting you on board comfortably without incident. As such, she will likely to be flexible with accommodating your requests. Negotiating with a human resource director is the next best alternative. They have guidelines in terms of salary and benefits. You may ask which benefits are flexible and which are standard. Ultimately, bringing on board the desired candidate is their primary function. They are incentivized to do so effectively.

  • Tip: It is best to negotiate compensation and benefits in person. Not surprisingly, you can receive valuable non-verbal feedback. Also, it’s harder to say no in person.

How do I research the position and company ahead of time?

Visit the company website to learn about their operations, mission, and value proposition. Read the job description thoroughly. Compare this job description to similar industry job positions. It will help you identify additional skills that you may be able to bring to the table. Gather this information by talking with current and past employees. They can be a wealth of information about operations, culture, hiring process, and who will be interviewing you. If you happen to be working with an outside recruiter (which is increasingly common), you can feel free to ask them almost any question. Just make certain to be humble and respectful.

How much is a benefit negotiable?

It depends upon the benefit. Often, a benefit is a we-offer-it-or-not scenario. Things like bonus or salary are negotiable. The general rule is that salary increases are usually small ($5,000-$8,000). Bonuses are generally far less negotiable, but the percentage increase may be higher, as this is often a one-time benefit.

How do I avoid looking greedy or difficult?

This is a valid concern with many applicants. You must make certain the negotiation does not become competitive. That is, negotiating the terms of employment should not seem like a conflict. It should simply seem like a necessary process for establishing the appropriate level of incentives. Here are some tips to make the negotiation process collaborative:

  • Reaffirm your excitement and intent to work for the company before bringing up the topic of adjusting compensation or benefits.
  • Don’t frame it as a problem or demand. Simply present it as a point of discussion to address in bringing you on board.
  • Don’t demand an immediate response. Bring up the issue of what you were hoping for in terms of a total compensation package. Do justify why you were hoping for a given level of benefits (remember, justification is based on industry averages and the value you bring to the company). Do not justify your request based upon personal needs. Always justify the request based upon the skills and value you bring to the position. Also, be prepared to address any company concerns or excuses. For example, if the request “throws off the salary structure”, ask where you fall in the structure and what does it take to be considered for the next salary structure. This may include making a request for a different employment title that qualifies you for a different salary band. After making the request – sit back and wait. The hiring manager may need to run the subject by HR or accounting to make certain everything works out. In any event, they will come back with a response shortly.
  • Second Offer – Whatever the company comes back with as a second offer is the final negotiating point. Unlike most negotiations that involve multiple back-and-forth offers, the compensation/benefits negotiation is generally a single back and forth. The company should, after hearing your aspirations, should make a good faith effort to accommodate those desires. If not, pushing the hiring manager for something that she is not able to give or willing to do harms the relationship. Also, being unreasonably demanding may cause the offer to be rescinded.

What if they ask me what salary I expect before they have made me an offer?

Companies routinely ask an applicant their salary expectations. The purpose of doing so is a screening function. They are trying to determine whether your expectations are in line with what they are able to pay. Also, particularly in small or mid-sized companies, they are also hoping that you will undervalue yourself. First off, ask whether they are making you an offer or collecting information. Armed with this information, you can more effectively address the questions. Here are some approaches to responding:

  • State your salary request – This is generally only a good idea if you have done all of the research possible on the company and position. If so, you should state your expectations with confidence and be able to justify it if requested.
  • Be Non-Specific – You may be able to leave the question blank on a form or avoid the question in a conversation. One way to avoid the question is to simply state a range that is based upon industry average. Also, you can qualify the response with “based upon the entire benefits package”.

What if they ask what I made in my previous job?

The purpose of doing this is to use it as a basis for your new salary. Many employers believe if they pay you a nominal amount over your previous salary that this is enticing enough for you to accept. It can be an effective method of saving money while making themselves appear generous. If asked, you should state the salary with any necessary qualifications. It may be that you received a lower salary because you have a flexible work arrangement, other non-obvious benefits, used the position to acquire additional skills for the future, or that the functions of the job were considerably different from the present job. Just as you cannot justify a level of compensation or benefits with irrelevant skills, your prior compensation and benefits should not be a basis for your current compensation and benefits if the two positions are unrelated. Once again, be explanatory and not defensive when explaining this to the interviewer. Another option is to give the total value of the benefits package, which could include bonuses, commission, additional opportunities for income (such as overtime), employer contribution to retirement or insurance premiums, travel allowance, reimbursements, etc.

What if the salary is much lower than I expected?

It may be the case that a business has misinterpreted the level of compensation or benefits necessary to bring someone into a position. If this is the case, it may be that what the company is offering and your expectations are too far out of line. At that point, you may want to do some additional research. You should always ask clarifying questions, such as: “Where does the offer fall within the company’s salary ranges?”. Ask about other benefits that may be non-obvious. If your company’s expectations do not meet industry average, you may be able to (respectfully) explain that you are looking for a position that is in line with industry averages. At that point, you will state your aspiration point with any justifications based upon your skill level. In doing so, you may want to bring in some information to show your employer about typical salaries for comparable jobs.
If this is not an option or does not work to improve the offer, you will need to make a determining whether negotiating a modest increase in salary will meet your needs. If no, you may need to say no to the offer. In any event, you want to be respectful and appreciative for the company’s time and consideration. Remember, never burn a bridge. You do not know when you will have to cross it again.

When applying, I’m afraid my prior salary will eliminate me from consideration?

Many people choose new positions that pay lower compensation or benefits that prior positions. This can be for any number of reasons – such as part-time or flexible work hours, remote work, better insurance benefits, location, nature of the job, etc. The best approach to this scenario is to be straightforward during the application process. You want to explain why you are so interested in the position. You can specifically bring up that the level of compensation is far less important than the other benefits. This actually sets the stage for the employer to craft an offer that better meets your aspiration point.

How do I ask about the potential for promotion or increase in benefits?

This is something that is easy to negotiate, as it often does not require the employer to make changes to benefits or compensation now. You should ask questions to determine where your offer stands in the pay range for the position. Find out what would it take to be in the next pay range. Specifically, what experience and qualifications do you need to reach the next level? What type of salary increases are typical? How often do employees get salary increases?

  • Note: Beware that if you are given a very high salary, increases are often smaller than those who have a lower salary because the company is trying to re-establish the salary parity.

Conclusion and Summary of Things to Do

To Do:

  • Preserve the relationship/appear accommodating/use problem solving. Make sure both sides are happy.
  • Prepare thoroughly & be realistic about your salary expectations
  • Wait to negotiate salary until you have an offer
  • Get the offer in writing
  • Know when to walk away
  • Think about the offer (at least 48 hours) before responding
  • Consider the entire compensation package and not just the salary portion
  • Practice negotiating
  • Demonstrate enthusiasm for the job

Things Not To Do

  • Issue ultimatums or hard bargain
  • Lie, exaggerate or mislead
  • Appear desperate
  • Negotiate based on personal needs
  • Squeeze the company. Know when to quit negotiating.
  • Ask for “one more thing”.
  • Negotiate with a company to increase your leverage with another. Only negotiate with companies you are generally considering joining.
  • Use job offers in unrelated fields as leverage
  • Make quick decisions because of deadlines

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