How to prepare for compensation negotiations when accepting a job

Unemployment dropped to 3.5% in October last year – a 50-year low. This means the battle between employers for top talent is more competitive than ever before.

 

The new year has always been a popular time to start searching for a fresh start at a new company. But with skilled candidates in short supply, now could also be a great time to negotiate a more attractive compensation package when considering whether or not to accept a new job.

 

No one understands this better than applicants themselves; the latest Jobvite national survey revealed 75% of recruiters had noticed an increase in salary negotiations from candidates. Nearly a quarter (23%) said the rise was ‘significant’.

— Jobvite (@Jobvite) November 16, 2018

 

The great news is that a bit of back and forth is unlikely to harm your chances of landing the job. According to the research, 43% of recruiters confirmed salary negotiations had no effect on their decision to hire a candidate. In fact, 19% said negotiations left a positive impression, suggesting employers expect – and perhaps grudgingly admire – a certain amount of pushback.

 

Just one in 10 hiring managers didn’t offer a candidate a job because of compensation negotiations. But even candidates who try to secure a better deal may not necessarily come away with everything they hope. That’s why I’d like to offer some tips and opinions on how to best approach compensation negotiations.

Factors to consider before negotiations begin

I don’t need to tell you that having a bottom-line number in mind before you start negotiations is a good idea! But how do you arrive at an ambitious (but realistic) figure?

 

There will be numerous factors to weigh up depending on your role, seniority, geographic location and current compensation package, as well as any relevant personal or professional preferences.

 

Step 1: Confirm you still want to leave

 

The first step is analyzing your career trajectory at your current job. In our annual Market Reports, career development is regularly cited as the main reason most professionals began looking for another role. However, are you generally happy with your existing management and their vision for the company? Do you already have options for growth where you are?

 

If you are likely to be promoted in the near future, you could be forfeiting lucrative opportunities over the near-term horizon by making an external move. You may also have to rebuild your credibility in another role and find new clients and contacts if you’ve signed a non-compete clause.

 

That said, our research shows the biggest jumps in compensation and seniority typically occur when switching companies. For example, those in cyber security jobs experienced an average 17% pay increase by moving roles in 2018, compared with just 5% for non-movers.

 

Step 2: Accurately calculate your existing compensation

 

Candidates have to look beyond their current base salary and place a value on every part of their remuneration. Here is a list of some of the bonuses and benefits you might need to consider:

• Short-term incentive compensation: Are you going to be forfeiting any bonuses when you move companies, or will your current employer buy you out? Would you be comfortable leaving that sum on the table if necessary?
• Long-term incentive compensation: These incentives are usually vested over a three-year period and are renegotiated after you’ve stayed with a business for a certain amount of time. Again, is your employer prepared to buy out your unvested stock? If not, how much do you stand to lose?
• Paid time off (PTO): Any unused PTO that you have scheduled should be paid out. However, if your employer runs an unlimited PTO scheme, you’re unlikely to receive anything back.
• Healthcare: Annual premiums for employer-sponsored family health cover reached $20,576 in 2019. Workers also typically paid $6,015 toward the cost of their cover. Would you lose benefits by changing jobs?
• Tuition reimbursement: Are you currently receiving support from your existing employer? Will your new employer be offering a similar level of reimbursement?

Step 3: Don’t forget less tangible perks

 

Non-monetary benefits are often harder to weigh up. For example, 96% of Americans want flexible working policies, but only 47% of professionals have access to these opportunities. Whether it’s remote working, flextime, part-time hours or other similar perks, flexible working can be essential for some employees, particularly those with family or caring responsibilities.

 

Your daily commute may also be a factor. The average time it takes to get to work reached record heights in 2018, according to U.S. Census Bureau figures. Americans typically spend slightly more than 54 minutes travelling to and from their jobs each day. Even just an additional six minutes per day quickly adds up; over a year, you’d spend approximately a full day extra commuting.

 

If a role requires relocating, this could also have an impact on you and your family. Are local schools better or worse? Is the property market more or less affordable? Would your quality of life, overall, improve or not?

 

Once you’ve assessed your career trajectory and current and future remuneration in your existing role, you’ll be in a much better place to accurately arrive at a magic number for compensation negotiations.

Approaching the negotiation itself

It’s common for people to feel anxious about negotiating their salary. Nearly 6 in 10 employees have never haggled over their compensation due to being scared or uncomfortable, according to a PayScale survey.

Yet, three-quarters of people who do take the plunge receive a salary bump. Clearly, it pays to be brave. However, the size of the increase you receive could depend on your approach to negotiations. In my opinion, here are some vital dos and don’ts:

 

DO ask for more than you’ll accept

 

Employers will always ask what your magic number is; and they will generally leverage your answer to move the needle in their favor. It’s crucial not to reveal your real bottom line figure straight away to retain some flexibility.

 

As an example, you should start negotiations of your base salary at between $110K and $115K if you’re targeting $100K. After some back and forth, you should hopefully arrive at a figure above your bottom line, or at least not very far below it.

 

DON’T justify your starting number (until you’re asked)

 

The conventional wisdom when negotiating is ‘those who speak first lose’. I believe there is truth to the saying. Candidates can be tempted to provide their desired figures and then launch into a monologue explaining why they arrived at that number.

 

A simple “what are your thoughts?” should suffice to get negotiations underway. Less is often more in these circumstances, so don’t talk yourself out of an offer. If your employers have any questions, they will get back to you.

 

DO respond quickly

 

Receiving a counteroffer is obviously a good sign, as it shows the company is willing to hire you. But don’t leave a potential employer waiting for a reply, as this comes across as unprofessional.

 

Aim to respond to emails within 24 hours – 48 hours at the absolute latest – even if that’s just to set a (reasonable) timeline for providing an answer after more thought.

 

DON’T go back and forth multiple times

 

Research may show that employers admire a small amount of haggling but avoid trying their patience too much. A typical negotiation usually involves your initial number, their counteroffer, a final counteroffer from yourself and that’s it.

 

You may decide on one more crack at the whip, if you have an appetite for risk. But I’d advise caution unless you have a clear sense from the employer that it won’t damage your chances of securing the role.

 

DO be honest

 

You may have multiple opportunities on the table, and I generally advise candidates to be as honest as possible when discussing what they need from a potential employer to clinch the deal over other job offers. It does depend on how comfortable you are taking this line though, so talk to your recruiter if you’re unsure.

 

Remember, it’s illegal for hiring managers to ask how much you’re earning at your current or last job in some states. However, you should be able to discuss what incentives and compensation you may be forfeiting by moving, which is important for negotiating sign-on bonuses and incentive buyouts.

 

DON’T commit verbally unless you’re serious

 

Employers commonly provide a verbal offer before a written offer is drafted. Once you’ve given verbal confirmation is when compensation negotiations often begin, so only accept if you’re genuinely interested in the role.

 

While you can pull out after providing a verbal offer, this isn’t recommended. Not only will you likely tarnish your reputation with that employer, but also word could spread into the market. Three-quarters of recruiters in the Jobvite survey said they’d experienced candidates changing their mind after signing a written offer, which is a definite no-no in most circumstances.

Negotiating the market

Effective preparation for compensation discussions is the best way to come away with the remuneration package you need to propel your career forward. The recommendations in this article are based on the insights I’ve gleaned from my experience of working with hundreds of employers and thousands of candidates.

 

But these tips come with a caveat; every company and role are different, so it’s important to tailor your approach for each job opportunity. To help you do this, liaise with your recruiter to arrive at the best negotiation strategy. Here at Barclay Simpson, we’d be delighted to help you find your next big career move.

Main image credit: Sebastian Herrmann via Unsplash

Body image credit: Corey Agopian via Unsplash