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Steps in Negotiating Salary and Benefits

Cite this article as: Jason Mance Gordon, "Steps in Negotiating Salary and Benefits," in The Business Professor, updated December 13, 2019, last accessed April 8, 2020, https://thebusinessprofessor.com/knowledge-base/steps-in-negotiating-salary-and-benefits/.

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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.

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