Compensation Negotiation for Employees

Advice for the currently employed but with implications for job seekers.

Posted Apr 26, 2017

Pixabay, CC0 Public Domain
Source: Pixabay, CC0 Public Domain

This is a good time for employees to negotiate: the unemployment rate is near a 50-year low and the rate of increase perhap, surprisingly, has been twice as high for the bottom half of earners.

Nevertheless, negotiation is fraught, especially for the employee. After all, the employer probably has negotiated many times more than you have and may even have been trained in it. Okay, here’s some training for you.

While this article is aimed at people who are employed and wanting a raise, much is applicable for the job seeker who has just been offered a position.

Should you ask?

These questions should help you decide if you should ask for a raise:

  • Are you an above-average performer compared with your coworkers?
  • Does your boss like you?
  • How easy would it be to find a position elsewhere that, overall, is better than your current one, even assuming your current employer gives you a raise?
  • How essential is your presence to the organization?
  • Do you sense there’s enough money in your boss’s budget to give you a raise? If your boss is doing lots of belt-tightening, your odds aren’t great.
  • Would it be tough for your employer to find someone at your current salary who could replace you without significant training?
  • If you got a significant raise, would you thereby become expensive compared with coworkers and thus be more likely to get laid off?
  • The catch-all question: Does your intuition tell you that, considering all those questions, the benefits of asking likely outweigh the risks?

Important: When’s the right time to ask? If your regular performance review isn't coming up, the best time is right after you've done well on a project, taken on extra responsibility, or your boss has praised you.

Preparing

It’s often been said, for good reason, that negotiations are won or lost mainly before the negotiation itself. Preparation is key:

Get other interest? Nothing helps your confidence and bargaining position like interest from another employer. Even if you intend to stay, put out feelers. If you get any nibbles, you can legitimately tell your boss, "I'm happy here but another organization has expressed interest in me."  Or if it feels right, you might try a tougher stance: "I'll need to know your best offer" or even "For me to say yes to you, I'll need X dollars, Y Title, the right to work at home two days a week, and the job description tweaked so I spend more time doing X and less time doing Y."  That may sound aggressive, but in this job market, my clients, on average, have done better by making an offer that's the high side of fair rather than following the conventional advice to try to get the employer to make the offer. Too often, that offer is a lowball, from which it's hard to make much progress.

Telling your boss about other interest, especially if worded strongly, may risk alienating him or her but even if you don't mention it, you'll be more confident in your negotiation. If you've been a job seeker, as soon as you know an offer is coming in, let your other warm leads know that. That could trigger and accelerated offer to compete with the one you're about to get.

Know risk-reduction tactics. Many people fear that if they ask for a raise, they’ll get a response like, “You’re already too expensive. I think we need to let you go."

You can counter such fear by knowing ways to reduce the risk:

  • Use a positive tone, for example, "I'm confident we'll come up with something we'll both feel good about."
  • Try to get the employer to make the first offer and listen carefully for cues that the offer is final. If you're not sure, a low-risk way to assess that is to ask, "How firm is the offer?"
  • Use this rule of thumb: Reject the first offer; accept the second. Anything you might get beyond the second is usually too little to justify the risk.

Keep a log of your contributions

Examples:

  • How you saved the organization money or boosted sales
  • How you decreased hassle or stress on a project
  • How you showed leadership under pressure.
  • Times you went above and beyond.
  • A recent upgrade to your job responsibilities
  • Recently completed training or a degree.

Your goal is to end up with a number of bullets that make your case, perhaps plus laudatory notes from higher-ups, clients or colleagues.

Try to get comparable salary information. Ask colleagues in and outside your organization: perhaps your friends, alumni, or LinkedIn connections. Also, check out the salary surveys on Glassdoor.com, Salary.com, and Payscale.com. Also, your professional association, for example, the American Psychological Association, may have conducted a salary survey.

Your goal is to create a list of comparable salaries—adjusting them based on your job description and your qualifications. At the bottom of the page, stating what would thus be fair compensation. Or try to justify 10 to 15 percent above fair—Everyone needs to feel they've gotten a win, so making your request a bit high allows your boss to feel s/he's getting a good deal in offering less without it unduly hurting you.

Consider proposing an upgraded job description, even if your job title remains the same. Higher-level work justifies higher-level compensation. For example, might you offer to supervise more people or write a grant proposal?

Get clear on your negotiation's highest realistic goal, your expected goal, and the least you'd accept. Don't focus only on cash compensation because that, unlike benefits and perks, are taxed, indeed taxed at your highest rate, which is most major metropolitan areas means you'll keep only half, and gives the employer nothing in exchange.  Even if you get an extra 25% over what was offered (rare), the after-tax benefit to your lifestyle may be modest. Pushing hard for a big salary bump increases the risk of the offer being pulled because, as mentioned, the employer gets nothing in exchange. Instead, you may want to prioritize such items as:

  • a job description tweaked to accentuate your strengths or simply be more fun
  • whom you report to
  • a title change
  • part-time telecommuting--ever more valuable given the ever-worsening commutes.
  • flex time
  • fully employer-paid health care
  • deferred compensation such as stock options
  • fully funding your 401kBeware of stock options. But beware: they're seductive but especially in start-ups, it's rare that they end up worth much. For every start-up employee turned zillionaire there are countless people with stock options worth zippo
  • tuition reimbursement
  • a training budget. This is a low-risk ask because the employer benefits. Who knows, maybe you'll get a week at a professional conference in, let's say, Hawaii
  • vacation days. Think twice about pushing hard on that one. It's another item that yields the employer nothing.

It's dangerous to try to negotiate too many items. Of course, every situation is different but a rule of thumb is to negotiate salary plus two or three items.

Prepare counters to no's. For example, you might anticipate your boss saying, “You’re a good employee but our budget is tight so I can’t give you a raise.” You could respond by asking for some of the non-cash items above. Or request a bonus if you achieve some goal.  Or explain how, moving forward, you’re likely to contribute more to the bottom line. Or get your boss to commit to a salary review in two months.

Now we get to psychological preparation.

Put yourself in your boss’s shoes. Ask yourself, “Would this tactic work on this boss?” Also, taking his or her perspective may help you stay calm if the boss is tough in the negotiation. For example, the boss’s salary may depend on staying within budget. Or s/he may worry that if you get a raise, all your peers will want one, which would be unaffordable or force the boss to tell some people they don’t deserve a raise, which could hurt morale. I even know a boss who makes less than his supervisees. In such a situation, a boss is unlikely to be sympathetic to your request for a raise.

Prep to stay calm. It’s easier said than done but, in advance, rehearse staying calm after a low offer or a dismissive response—that could just be a tactic to intimidate you. That's how some people have been taught to negotiate. It may help to role play with a friend who plays a tough but realistic version of your boss.

Stay focused on the issues—Be easy on the person, harder on the issues. If you can’t stay calm, remind yourself that you can say that you need to use the restroom or even postpone the conversation for another day.

Get an in-person appointment. Now that you've prepared, email your boss a request for an in-person (not email)  compensation review. Include your list of accomplishments and comparable salaries.

Remember that not every negotiation can be win-win. Sometimes, you need to be tough and adversarial, other times conciliatory. The default is to be soft on the person, harder on the terms but that will vary with how strong you believe your negotiating position is: how much they seem to want you, how good you’d be as an employee, how viable you’d be in the job market, and whether you sense the employer would respond better to niceness or toughness. Even if you want to play hardball, keep reasonableness as your guiding principle. Otherwise, the job offer might be pulled when, even on less-than-ideal terms, you’d take it.

The ask

Here's how to make the most of all that preparation:

Moderate your demeanor. Be friendly but not too friendly. That can feel like a ploy or make the boss think you're a softie who'll take a lowball offer.

First steps. Generally, it's wise to start by listening to the boss’s response to your list of comparable salaries and accomplishments. Unless it's clear the offer is generous, you might ask, "How did you arrive at that?

Consider using what I call the pained pause. Sometimes, just being silent with pursed lips in response to a bad offer can yield a better one without your having to be argumentative. Those few seconds could be the highest per-hour pay you’ll ever receive.

Mention other interest? If there has been other interest in hiring you, you can mention that without appearing too disloyal, even though your employer probably wouldn’t let loyalty stand in the way of replacing you if it was deemed in the organization’s interest. For example, you might say,

"I’m flattered that another employer has expressed interest in me. I didn’t want to jump at it because I enjoy working for you but I’m concerned that, per the chart I showed you, I’m about 25 percent underpaid, and there’s even more I could do for you with a revision in my job description. What do you think?"

However, as mentioned earlier, mentioning other interest in you increases the risk that your boss will look to replace you or at least put you on the slow track.

Deflect impasse. If you reach impasse on salary, rather than let that stall things, say something like, "How about we put salary aside for the moment and discuss an issue that may be easier to agree on?"

Maintaining perspective. Be careful not to get emotionally caught up in the fray. Keep your perspective. I know it hurts to hear “no,” let alone a hardball “no.’

It may help to, as mentioned earlier, put yourself in the boss’s shoes and recognize that the reasons for "No" may have little to do with you.

Also, remember that the after-tax benefit to your lifestyle may not be worth alienating the boss, creating heightened expectations for you, or increasing the risk that in a layoff, you, expensive, would be more likely go on the chopping block—Don’t let your ego get in the way.

If you’re getting upset and feel that showing it won’t help your case, see if you can muster the restraint to not blow up nor cave but rather, monotonically say, "I understand your position. I need to use the rest room.” That can give both of you cooling-off time and make the boss feel, without confrontation, insecure about his/her inadequate offer.

Accept the second offer? Consider using that rule of thumb: Reject the first offer; accept the second. Any more you get after the second offer may impose too big a risk.

Don’t rush. Not every negotiation can be settled in one meeting. Sure, aim for that so you don’t appear high-maintenance and thus risk having the offer pulled or getting off to a bad start with your boss. But if you sense you’re at an impasse or that you or your negotiating opponent is getting overheated, you might say that you want to take a break and that you'll get back to them. If you’d been reasonable, that could scare the employer into agreeing to your requests/demands on the spot or after a cooling-off period. It certainly avoids your appearing desperate.

What now? If you’ve gotten turned down cold, and especially if that’s also occurred on most previous occasions, you might have some thinking to do: “Am I as good as I think I am?” If so, maybe it’s time to look for an employer willing to pay you what you deserve.

But chances are, even though you're probably less experienced in negotiating than is the employer, if you can follow even some of this article's advice, you'll do better than do most employees.

I read this aloud on YouTube.

The Best of Marty Nemko is now out in its 2nd edition. Marty Nemko is a career and personal coach. You can reach him at mnemko@comcast.net.