Learn Salary Negotiation or Pay the Long Term Costs

salary Salary negotiation early in one's career can have a huge impact on the lifestyle they have in the long run. The biggest impact is determined by the salary they negotiate before their first day of work in their job.

This should be considered whether it is a first job out of school or a mid-career job change. Beyond that, there are impacts even when you are working for an employer that you are very happy with. Not engaging in salary negotiation at the right time can have real financial impact.

During your career, you may earn pay raises and job advances within the company that you work for, but when the company offers regularly scheduled increases, as many companies do, the impact of your starting salary with that

employer is significant.

This is not only applicable to your first salary negotiation and subsequent incremental pay raises but also to salary differentials you may get when you changes roles within a company. You may switch into a job requiring significantly increased duties, effort, or responsibilities, and the salary you had earned beforehand can genuinely influence the starting salary at the new job.

Take for example a person starting a new job as a business analyst in a software company somewhere in the US. Say for example that person begins with a starting salary of $45,000. Most likely that person will have to put in 6 months to a full year before they are offered their first pay increase. Suppose it is a 10% pay raise which would be SIGNIFICANT in many companies. The employee would gain an additional $4500 per year because of that increase.

Suppose that same person started at $55,000 or more. That same pay hike of 10% would provide the same employee $5500 additional salary per year. With the first salary band, the employee would still be under the $50,000 mark after one full year of effort and after a 10% pay increase, while in the second situation the employee would be at over $60,000 a year after a 10% pay increment.

Now analyze the compound repercussion of these two starting salaries on the individuals earning potential. First let's examine a 4 year timeline, all other things being equal (that is, suggesting no pay increases and no job advances). The person earning $45K will have earned $180K in total salary in 4 years. The person earning $55K will have earned $220K in 4 years. That is a $40K difference just based on where the employee started in terms of negotiated compensation.

Now imagine a 10% raise after the first year and consider the impact as the person advances through their career. The person with a higher salary in the beginning will always be ahead of the person with the lower starting salary, all things being equal (e.g. same title, same job performance). The person with the better salary negotiating will be moving ahead faster than the person starting with the lower salary. This impact amplifies with each subsequent year considering the same percent annual pay raise for each.

When requesting a pay increase, if a person earning $50,000 earns a 5% raise without negotiating anything additional, that's okay. But consider the impact if the person negotiates a 15% increase because they have really performed well in the job and they have all the supporting research and a track record to command it. That employee will have negotiated $7,500 in a raise versus just accepting $2500. Multiply that by 10 years, and there is a clear $50,000 difference in the person's salary potential.

Experts feel it goes without saying that it is better to try negotiating a raise or an improvement to one's total compensation package than to simply accept what is offered. The first offer is often the lowest offer and can be negotiated higher. This salary negotiation must be done with tact and must be well founded with a supporting case for the pay increase.

One must also analyze factors such as market, corporate guidelines, and personal performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for a raise. Some people truly value free time, their quality of life, while others are willing to take a chance and maybe accept stock options in lieu of pay.

However, when it comes to negotiating, don't be afraid to consider asking for more.

Comments :

Anonymous said... on 

That is amazing data. I would add that, try to get some real life salary data as reference, sites like http:/www.salarylist.com provide lots of those data

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