When it comes to salary negotiations, many job candidates don’t know what to ask for and end up leaving money on the table. You don’t have to be one of them. In this article, you will understand how to approach salary negotiations when switching jobs to ensure a better salary.
Data on how a small yearly salary can impact lifetime earnings
Sometimes it is tempting to accept the first job offer that comes your way. But you must know that even a smaller salary can impact your lifetime earnings. It is like a ripple effect. Salary raises and bonuses are given as a percentage of salary, so what you consider as a small difference in the amount compounds to become a substantial difference in lifetime earnings.
It’s just like investing – where you start impacts your total return.
According to Linda Babcock of Carnegie Mellon University, if you don’t negotiate your job offer at the beginning of your career, you lose anywhere between USD 1 million to USD 1.5 million over your lifetime.
Another recent study estimated that a difference of $5000 (1903750 NGN) early in your career could end up costing you as much as $600,000 (228450000 NGN) over 40 years of employment.
Assume an average annual pay increase of 5%, an employee whose starting annual salary was N8m rather than N6m would earn an additional N173m+ over a 40-year career.
This is really a huge loss. By not negotiating salary, you are limiting your lifetime income potential.
The reason why you have more leverage when an offer is given to you
Once you have the job offer in your hand, you can have more leverage in salary negotiation to get a better outcome.
You should never take the first offer that is given to you. One big mistake most people make is they immediately say “yes” and accept the job offer. That’s completely wrong.
You must formulate a counteroffer to see if you can improve the offer. Ask for a higher amount and prepare your reasons for the ask. Tell why you deserve more. Don’t just say, “Because I am the best person for this role”. Give reasons and substantiate with evidence.
If you have not thought beforehand, buy some time. Don’t feel the rush to accept the first offer. Let the recruiter know that you appreciate the offer but need some time to think about it. Don’t be afraid to buy time.
The recruiter has spent weeks or perhaps even months to reach this stage, and they aren’t going to waste it just for few days. It’s absolutely okay to buy time before reverting on the first job offer. Rather, in this situation you have a stronger bargaining power. Recruitment requires a significant investment of resources from the employer. By this time, they are happy that it’s almost over and they are going to get the ‘perfect’ person for the job. Most of the time, they won’t mind giving a bit more salary instead of starting all over again. Plus, this might also get them thinking if you have offers from other employers, and they won’t want to lose you to another company. Also, you must know that most companies set aside money with the expectation that candidates will ask for better compensation packages.
Salary bias between men and women
Although women have made significant inroads in the corporate world, they still face salary bias. There are relative differences in the average gross earnings of men and women within an economy. In 2009, UNDP observes that between 1985 and 2008, inequality in Nigeria worsened from 0.43 to 0.49, placing the country among those with the world’s highest inequality levels. Despite its vast resources, Nigeria ranks among the most unequal countries in the world.
In the past three decades, women in Nigeria have made notable gains in participation in the workplace, including increased labour force participation, substantial gains in educational attainment, employment growth in higher-paying occupations, and significant gains in real earnings. However, notwithstanding these gains, there is still pay gap between males and females across almost all occupations in favour of men.
Women tend to be subject to negative stereotypes concerning their work-related competencies. Women feel less worthy and less entitled to higher pay. The gender wage gap appears to widen as employees climb up the career ladder. They are less likely to negotiate for pay raises – and those who do so may be perceived as pushy.
A study revealed that when men and women get their job offers, only about 7% women attempted to negotiate, while 57% of men did.
This must change. Women must equip themselves with the skills to negotiate for pay raises and promotions.
Why women don’t negotiate their compensation as much as men
In a survey, 60% of women said they’ve never negotiated with an employer for pay. This raises the question WHY? Aren’t women confident enough to negotiate their compensation?
Most women want to be viewed as hard-working and trustworthy rather than as greedy and selfish. They expect that “one day” someone is going to walk up to them and make them a better offer. They shouldn’t “ask”. That’s how they are conditioned – sacrifice your value in exchange for everyone’s good, with the optimism that others will appreciate their act with “respect,” “love” and “gift.”
Women are more reluctant to negotiate. Women attach a significantly greater social cost with negotiation for higher pay. They get nervous about negotiating for higher pay because they are intuiting that this will create a socially difficult situation for them. However, men aren’t anxious about overplaying their hand and alienating their negotiating counterparts.
Understand the Psychology of negotiating
What is negotiation?
Negotiation refers to discussions between parties who have opposing but also some shared preferences and interests to reach an agreement on important issues. It’s all about using effective communication skills to reach a mutually beneficial decision for both parties.
There are five approaches to negotiation
- Competition (I win, you lose)
- Avoidance (I lose, you lose)
- Accommodating (I lose, you win)
- Collaboration (You win, you lose)
- Compromise (I win some and lose some)
In the case of salary negotiations, both parties have a common interest and long-term relationship ahead, so what do you do in this situation? You want to take a decision that satisfies all concerned parties and gain strong commitment from both sides. So, ‘collaboration’ is the best strategy where both parties win – the employer gets a talented and committed employee, and you get the best possible employment terms.
So, how do you negotiate for a successful outcome?
In their 1983 classic, Getting to yes – Negotiating agreement without giving in, Roger Fisher and William Ury described four principles of effective negotiation.
- Separate people from problem – We tend to become personally involved, so we view the recruiter’s or hiring manager’s resistance to our proposed salary figure as a ‘personal attack’. When you separate yourself and your ego from the issue at hand, you’ll be better able to address the problem.
- Focus on interests, not positions – Most time, people waste time focusing on getting their way or finding a compromise point between them. You should try to understand the employer’s underlying interests and motivations – why do they hold the position that they do? For example, when the recruiter asks, “How soon can you join?” their intent is not to put pressure on you, but they need someone to start as soon as possible (probably the position is lying vacant for a long time). Propose solutions that meet their interests – how you’ll bring value with your skillset, knowledge, past experience, and right attitude. Clearly explain the salary figure you have in mind.
- Invent options for mutual gain – You need to avoid falling into a win-lose approach: If you get a higher salary, the employer loses, or if you don’t get a higher salary, you lose. Instead, consider the whole deal. For example, if the employer can’t agree to a salary increase, ask for an additional joining bonus or propose joining early if they can extend a salary increase.
- Insist on using objective criteria – Instead of arguing on the facts, use objective criteria to settle the differences. For example, you can state the market rate for the particular job position, skills, and number of years of experience.
Do your research on what the company can offer?
Information is power. Do as much research as possible about the company, its employees, and their salaries. This will help you get a benchmark of salaries paid by the company.
- Search the Internet
- Use your personal network
- Connect with other employees of the company through LinkedIn, Facebook or Twitter
This will help you come prepared for the salary negotiation.
Some good websites can provide salary information of the people working in the companies.
You can check individual companies and see the salaries that people in specific positions have earned and the reviews by past and current employees of the companies. Of course, you won’t get exact details, but it would help you set a benchmark to determine what the company should pay you.
Usually, all companies have a salary range for each job grade. Also, don’t feel shy to ask the recruiter about the typical salary range for a position you are being offered.
Include non-monetary compensation by thinking of your recurrent expenses
Even though we say cash is king, we know there is more to the story: the cash alone. Sometimes, the base pay might not be very high, but if you feature in health insurance and a generous retirement plan, it becomes a meaty amount. Non-monetary compensation can equal almost 30-40% of the value of the cash compensation. So, evaluate the non-monetary compensation by thinking of your recurrent expenses.
Non-monetary compensation includes different things like free lunch, free coffee, free transportation, flex-time schedules, onsite childcare, discounted parking, retirement plan, gym membership or onsite gym, in-office Zumba, annual health checkup, and medicare. These can significantly reduce your household expenses.
Negotiation is a two-way street
Negotiation is a two-way street, a give and take exercise. When negotiating, you discuss and not argue. Make sure both the parties are speaking as well as listening in equal amounts.
Keep your composure, and don’t let emotions take over. Pay attention to the face expressions and gestures to assess what the other person is feeling and adjust your language and tone to proceed.
Let the recruiter/hiring manager know that you understand their point of view and how your solution can benefit them. Avoid negative statements like “You are wrong….” “That’s not right….” This may put them on the defensive and may break the negotiation.
Discuss compensation only when you have an offer and not before
A common mistake of candidates for a job is trying to negotiate before they are assured a job offer. Never try to negotiate salary before you have received the written job offer from the employer. The key here is to make sure that a written offer is sent to you by email before you begin any salary discussion. The written job offer serves as evidence that the employer definitely wants you. If the approval is only verbal, a salary negotiation should be put on hold.
Avoid providing any reference to your current or last compensation structure during the and after the interview process
The recruiter might ask you about your current or last compensation structure. What should you do?
You may think that you may appear as a “good” person by giving this information but STOP. It doesn’t benefit you in any way and, it isn’t mandatory to share this information. For one, your salary is a confidential employment agreement you signed with your current employer. Secondly, this cannot be a benchmark for the new job role you are being interviewed.
The new job role might be with greater responsibilities than your last job, or you are making a transition to a larger company. In this sense, if you share your current or past salary details, you might set a very low benchmark for them. This will weaken your bargaining power when the time comes to negotiate salary.
So, what should you do?
When asked about salary history, the best thing is to share information regarding the relevant job position’s market value rather than your salary history. This will tell what you are worth.
If the company pushes you for a more detailed response, give a similar response in different ways. Tell the company, with all due respect, that you don’t think your salary history should affect your prospective salary future at a different company – especially if it’s in a different industry. You could try deflecting the question to focus on what the new job requires and why the old pay would not be a good match.
Why shouldn’t you be negotiating via email?
Congratulations! You got the job offer via email. Pat yourself on the back, and celebrate.
Salary negotiations are emotionally draining. Most people want to avoid doing it on the phone or in-person, so they chose “email” as the best bet. It is a bad idea. If you are going to request a salary increase, flex time, or additional vacation days, it should be done as an open dialog between you and the employer. Writing a list of demands on an email seems like “extortion”.
It’s not a one-day interaction, but (hopefully) an ongoing relationship. Neither you nor the employer wants it to start with any sour feelings.
All that you should do is write a short and sweet email that conveys three things
- Acknowledge of the job offer
- Enthusiasm for the job
- Request for an appropriate time to discuss a few details
Generally speaking, “it’s better to do in person or over the phone. Negotiating in person gives you the opportunity to adjust the script based on the feedback you’re receiving from the hiring manager – not to mention his or her body language, which can be a big tip-off.
Negotiation is a skill. Most people switch jobs to earn a better income. But, if you can’t skillfully negotiate your salary, the switch is nothing but a ‘façade’. Whether you are a man or a woman, you must be adept in the art of salary negotiation to get what you deserve. By not negotiating properly, you are doing a great disservice to your skills and values. So, learn, practice, and develop the skills of salary negotiations when switching jobs.