The New Salary Negotiation Guide
For the first time, employees have access to the
equivalent of a Kelley Blue Book for jobs. The availability of online
compensation information has leveled the playing field between employer and
employee when it comes to negotiation and job offers. Employers who are
confident in their pay practices should welcome these new data sources, as they
provide external validation that their compensation is competitive with the
Before there was online salary data for
everyone, disappointments and disconnects like these were common.
* The irrelevant request.
Employee: I need 10 percent more because I just bought a new house. Employer:
Why is funding your lifestyle the company's responsibility?
* The annual increase.
Employer: We're getting 4 percent across the board this year. Here's your 4
percent raise. Employee: Oh, thanks. I guess.
* The counteroffer.
Employee: I got a job offer for 10 percent more
than I'm making. Employer: Um. Let me see what I can do.
* The done deal. Employer
(passing employee in the hall): Here's your paycheck with your new raise.
Employee: When did we negotiate this?
Better access to data improves the quality of
salary negotiations by making it possible to start on common ground. The new
salary negotiation is starting to look more like this.
1. Agree on a benchmark job.
2. Agree on your proficiency and performance
3. Agree on the market value of the job.
4. Agree on where your salary should fall.
5. Agree on what performance is necessary for
future salary increases.
Step 1. Agree on a benchmark job
You and your employer compare your job
description to that of a benchmark job. Your responsibilities should be at
least a 70 percent match to those of the benchmark position. Chances are, your
employer has already done this. Make sure you know what job the company has
compared yours to, and understand any discrepancies between their idea of your
level and your own. For example, they might think you are at the middle level
of a job (e.g., a Level II) while you think you're at a senior level (e.g., a
Level III). If so, work with your boss to understand each other's reasoning and
resolve the differences.
If you really are working at a higher level, you
may be able to negotiate for a promotion. Or you may have advanced as far as
you can in your position. If there is no path for you with the company, you may
have to choose between doing the same job for a long time and moving to another
company. On the other hand, if you have shown that you can handle additional
responsibility and the company has room for growth, this may be your time to
Step 2. Agree on your proficiency and
Whether you are receiving a job offer from a
company or going through your performance review, you and your employer should
agree on where your performance fits in relation to the benchmark job
description. If you are new to the position, for example, chances are that you
already have some of the required skills but are developing others. In the new
salary negotiation, your level of proficiency and performance will determine
how close to the median you'll be paid.
Proficiency and performance are related, but not
the same. You become proficient in a job as you acquire the relevant skills.
Your level of performance is how well you do that job. Proficiency is only one
component of your work that should be measured in your performance review -
attitude, punctuality, teamwork, and other general skills are also taken into
If you are very good at the technical
requirements of your job, but have not developed solid soft skills, your
performance review is likely to reflect these deficiencies. Conversely, if you
have a winning attitude and are a solid team player but aren't yet good at the
specific skills required for the job, your lack of proficiency could hold you
Step 3. Agree on the market value of the job
You've researched the numbers, and so has your
employer. Online compensation data is a good starting point for the
conversation about what your job should pay.
If you have agreed on a benchmark job in Step 1,
it should be relatively easy to agree on the market value for that job. Your
employer is likely to have access to additional sources of data that provide a
better level of detail than what is available to you. The data your company has
is generally very specific to the company's compensation philosophy.
For example, if your data is from the Salary
Wizard, it reflects the current month's national average for your job - for all
size companies across all industries, adjusted for the region in which you
work. Your employer's data might show what your company and a dozen or so
direct competitors are paying for the job. Depending on the industry and the
region in which you work, this number could be higher or lower than your
If you get to the point in a salary negotiation
where you and your employer are discussing the applicability of various data
sources to your situation, you're doing great.
Step 4. Agree on where your salary should fall
After you and your employer have agreed what job
you're doing, how well you're doing it, and what the market pays for that job,
you're ready to discuss what you're worth to the company.
Let's assume for a moment that your performance
is at exactly the midpoint of what is expected for someone in your job. You
have shown your employer an average proficiency and average performance. You
should expect to earn the approximate median for the job.
The company's pay philosophy and pay structure
come into play here. (See related articles on pay philosophies and pay
structures.) Depending on the importance of your job to the company, your
employer might actually pay you more than the median as part of a pay
philosophy geared toward retaining people in your position.
For example, a law firm might pay its
administrative assistants above the market rate, because they are critical to
organizing the firm's work and maintaining relationships with clients. Or, a
software company might pay its programmers above market because their skills
are so scarce.
A company might pay you less than the median in
base salary as part of an overall total compensation program that could be at
or above market. In other words, some companies provide higher or lower pay
levels to balance with their bonus plans, stock options, benefits and even
intangible rewards. Still other companies might pay people in your position
less than the median because your job is not as critical to the company's
success as some other jobs.
The company might agree that you're worth a
certain amount, but be unable to pay it. If raises really are 4 percent across
the board, you have to make the case why you have earned a bigger increase.
From the manager's perspective, a larger raise for you often means a smaller
one for someone else. But if you agree on what you should be paid, you can
start to create a path for how your employer is going to bring you there -
maybe not during this review period, but over time.
After you've discussed where you should fall in
the context of the company's pay philosophy and structure, you're ready to
agree on a number and and start earning your new salary.
Step 5. Agree on what performance is necessary
for future salary increases
Performance reviews and salary negotiations are
continual processes. The last step of one salary negotiation should be the
first step of the next. With this in mind, talk about your future - the next
three to six months.
Now is a perfect time to set the groundwork for
what specific performance objectives you need to achieve to get a larger raise
or promotion in the near future. One of the major reasons people are
dissatisfied with their salary increases is that the raise is less than
expected and the boss doesn't have room to increase it. Setting the expectations
early doesn't guarantee anything, but it does cause your boss at least mentally
to "reserve" that money for you from the next raise pool.
By talking about future performance and
expectations, you are jointly committing to a positive working relationship
going forward. This helps end your negotiation on a positive note for both
Negotiate for a win-win The data itself is
neutral, but subject to a great deal of interpretation. It is a set of facts,
but it is not law. You should negotiate in relation to it - and so should your
employer. Demands and ultimatums based on any published data without open
discussion are likely to leave everyone dissatisfied. A good negotiation is a
discussion in which each party understands and respects the other's position
and it ends when all parties feel their positions have been heard and their
needs have been optimized within the other party's limitations.