Consumer

/

Home & Leisure

Carla Fried: Negotiate your starting salary — doing it right can add $750,000 more during your career

Carla Fried, Rate.com on

Published in Home and Consumer News

Adulting can be one long financial trial by fire. Staying on track with student loan repayment, navigating the dos and don'ts of building the almighty credit score, somehow finding the cash flow to start saving for retirement, all while making rent.

Add one more item and all the others get easier: negotiating your salary. The more you make right out of the box, the higher the foundation from which raises will be added. When it comes time for your next job, you'll have a higher salary to negotiate from. If there's a company matching contribution to the retirement plan, a higher salary nets you a higher match.

An analysis by ZipRecruiter based on data from more than 50,000 job-seekers estimated that negotiating an initial salary offer up from $40,000 to $45,000 could, over a long career, add $750,000 to total pay. ZipRecruiter math used an aggressive 5% annual pay increase, a bit more than the norm.

Linda Babcock, an economics professor at Carnegie Mellon and expert on the cost of non-negotiation, used a more moderate 3% annual salary increase in this explanation. Still, a starting offer of $40,000 bumped up to $44,000 translates into having more than an additional $620,000 over your career. Negotiating an early $70,000 salary up to $77,000 could, over a career, land you with nearly $840,000 more.

Yet people won't negotiate. In the ZipRecruiter survey, only 16% of workers between the ages of 18 and 24 negotiated an initial offer. Among 25- to 34-year-olds, 75% took the initial offer. And 60% of older workers accept the first offer. Don't be those people.

Don't volunteer to provide the anchor. During the interview process you will likely be asked outright, or in some obtuse way, the salary you expect. Resist naming an exact number if possible; that only gives the interviewer an anchor price to base negotiations on. Saying "I'm looking for a competitive offer of salary and benefits based on industry and regional norms" signals you've done your homework.

Do your homework. Know starting pay and benefit ranges for the job. Salary.com, PayScale and Indeed have detailed data. Glassdoor features employee reviews along with salary info. Be aggressive hitting up friends, friends of friends and connections (college alums, LinkedIn) to get intel on the job you're after.

Considering a relocation? Know the actual cost of living in that area: rent, state income tax. A $45,000 offer in a low-cost area can beat $65,000 in an expensive market. The new tax law could also influence your location in making a career choice.

At the stage a job offer is imminent and you are asked (again) about salary expectations, repeat your "competitive bid" message. Let them throw down the first number. If you are pressured to cough one up, give a range: "My research suggests a base salary between $45,000 and $50,000. I'm looking for something at the higher end."

 

Get your head in the right game. Negotiating requires threading the needle between being a passive wuss who takes the first offer and burning bridges with off-putting aggression. Approach negotiation as conversation, not confrontation -- a respectful professional conversation, based on facts (remember, you did your homework).

Negotiate! Even if you're offered more than you expected, don't reflexively say yes. The hiring manager is expecting you to counter. Telegraph that you are leaning toward yes. "I'm excited to join the team. Based on the responsibilities you have laid out to me and my market research, if we can agree on $X, let's talk about my start date." If the offer is well below what your research tells you is reasonable, say so. Again, politely but firmly. "Can you help me understand how you came to that offer? Given my understanding of the job and salary research -- both in the local market and specifically at this company -- I was expecting an offer no less than $X." Tip: That "no less than $X" should not be your drop-dead number. Aim slightly higher, which gives the hiring manager room to come back with a counter to your counter that will land in your comfort zone.

Pay attention to the total package. You may want to negotiate non-salary benefits. If there is no workplace retirement plan (with a match) you might mention the cost of funding your own IRA as a driver of why you are countering with a higher proposed salary. Or ask for another week of vacation.

Practice your pitch. Ask friends to take on the role of your HR counterpart, or of the boss you're trying to get a raise from. Find the exact words and tone you want to bring to negotiation. Feedback is crucial; you want to be all warmed up and ready before the actual conversation occurs.

Rate.com/research/news covers the worlds of personal finance and residential real estate.

(c)2019 Rate.com News

Distributed by Tribune Content Agency, LLC.

 

Comments

blog comments powered by Disqus