In 2019, Elon Musk, CEO of Tesla, has a total compensation salary of $595.2 million. In the same year, Apple’s CEO, Tim Cook, has a total pay package of $133.7 million, with only $3 million of that being his salary and the rest coming in the form of stocks and bonuses.
If one were to look at the list of highly paid CEOs across the globe, these familiar names would almost definitely appear somewhere around the top. So what is it about these people that allows them to command such lucrative pay packages?
Is it because they are borderline, if not all the way geniuses? Maybe but some smarter people don’t earn nearly as much in this world.
Is it because they work for some of the best companies in the world? It could be, but some people work for Fortune 100 who don’t make quite as much.
Maybe it’s their level of education? While most high-ranking CEOs did make it to high level Ivy League schools such as Harvard and Yale, not all of them graduated yet still command impressive compensation packages.
The simple truth is that apart from the fact that these people are extremely talented, very intelligent, and skilled at what they do, they have one other factor in common – they know how to negotiate a job offer.
Someone like Elon Musk doesn’t even cash high salary checks, which, incidentally, are made out to be within the minimum wage salary range. So how does he end up earning more than half a billion dollars a year anyway? Salary negotiation.
It’s the same reason why Patrick Mahomes earns about $45 million a year as QB for the Kansas City Chiefs while a big brand name like Tom Brady earns $25 million as QB for the Buccaneers. Arguably, Tom Brady is a more iconic brand and an impossibly talented QB when compared to Mahomes. So why does Mahomes earn almost twice as much?
Of course, there a lot of other factors that come into play, such as:
- Raw talent
- Prospective employer
However, it mostly comes down to salary negotiation and the kind of effort Mahomes and his manager or agent put in as far as the base salary and final salary offer were concerned. As this NFL analogy shows, learning how to carry out salary negotiations for a new job offer could quite literally make the difference in terms of millions when it comes to your salary expectation and actual compensation.
How Do You Know if You Should Negotiate Your Job Offer?
Employers who understand the value that top ranked employees bring to the company fully expect them to negotiate their salary. Unfortunately, salary negotiation is a process that most employees are either not very comfortable with or afraid to initiate. According to a study carried out by Robert Half, only 39% of all workers try to negotiate their salary upon receiving a job offer.
Granted, some job offers are non-negotiable such as government jobs that have a capped salary range depending on your job designation. Other than that, most private sector companies and hiring managers fully expect potential employees to initiate a job offer negotiation at the tail end of the hiring process.
Quite frankly, the ability to negotiate with the hiring manager or prospective employer could lead to a higher salary or better benefits.
So, how do you know if you should negotiate your job offer?
1. When You Have the Official Job Offer
The sacred rule of negotiation is to always find the right kind of leverage with which to negotiate. One mistake that many would-be potential employees make is negotiating their salaries and even playing hardball before they actually have an official offer at hand.
Not only is this a risky move since you don’t really know if the offer will come at all and you are just making assumptions, but it could very well turn the employer off you as a prospect.
No employer wants to deal with an unreasonable candidate unless they feel like they really need what that candidate is bringing to the table.
Only start the salary negotiations when you have an official job offer at hand. This does two things:
- Gives you leverage since you know for a fact that they want you for the job
- Gives you a clear idea of the employers starting salary for your position
The second point is quite crucial – without that starting salary figure, your negotiations will mainly be based on anecdotal facts. Just because the industry says that you should be paid a certain amount for your skills doesn’t necessarily mean that every employer can match that demand. Knowing what they are willing to offer gives you a clear idea of what they can afford. You can base your negotiations on a certain percentage of that as opposed to doubling or even tripling the amount that will send the employer scampering for the hills.
2. When You Know Exactly What Value You Bring to the Table
Like most business owners, employers only really care about the kind of value that the potential employee brings to the table and are willing to compensate that employee accordingly. This means that you must be able to demonstrate or, at the very least, highlight your value during salary negotiations.
This also means that you need to identify what the market or industry generally places on your specific skillset. Once you have that general price in your head, you can negotiate around it (even go higher) because the employer will almost always want to talk your asking price down to a point.
3. If You Haven’t Accepted the Offer Yet
Depending on how long you have been out of a job or how much you hate your current job and need to move, you could be tempted to accept anything that is thrown at you due to excitement.
Should this happen, and you accept a job offer at a lower starting salary, you should never try to renegotiate immediately. You could always bring the issue up after a few months of excellent performance on your part but not just before you start the job you already accepted but doesn’t offer your salary expectations.
Should you do this, your employer is more likely to rescind the offer for two main reasons:
- They’ll think that you have all the makings of a prima donna who will cause them nightmares
- You come off as undecided, unknowledgeable, and greedy – all traits that most employers don’t want in their employees
The idea is to carefully consider the job offer and bring up your concerns and negotiation skills before accepting, not after!
4. The Job Responsibilities Are More Than Expected
Every job has a job description which most companies try to follow to the letter. However, in some cases, employees may be required to do more than their job description calls for or a bit more than is within the typical industry scope.
Once you realize this, you have every right to negotiate for better compensation based on the added job responsibilities.
When Shouldn’t You Negotiate Your Salary?
On the contrary, there are some moments when, although negotiating might seem like a good idea, you really shouldn’t do it. These include:
- When it’s their best offer: When the hiring manager tells you that what they have on the table really is their best offer, trying to negotiate for better pay won’t work. Quite frankly, most companies are perfectly fine with telling potential employees what kind of budget they have for a specific position.
This is often in addition to remarks like: “we feel you would be a perfect fit for us, but we can only afford so much.” When this happens, you have the option of either accepting the job as is or negotiating on a timeline for a possible raise but never a higher salary from the start.
- It’s the industry standard: As mentioned, some companies might not be able to afford the required salary despite it being the industry standard. However, when you find a company willing to match that current standard based on your market research, experience, skills, and geographical location, trying to negotiate for something higher will make you seem greedy and out of touch with the industry in general.
The idea here is to take note of the fact that every situation is going to be different. Meaning that every company you deal with will have its own capacity for negotiation and what they can afford. Sticking to your guns without this information will probably have you out of a job rather than paid better.
What Are Some Skills You Need to Negotiate a Job Offer?
Like any other form of negotiation, salary negotiation is an art form and skill that takes finesse, know-how, and some level of experience. However, even first-time job seekers can successfully negotiate their salary provided they know how to approach the situation.
Here are some salary negotiation skills that every potential employee needs to bear in mind:
1. It’s a Conversation
When negotiating their worth (which quite frankly is what a salary negotiation is to both parties involved), the problem with most people is that they let their ego get in the way. Whenever negotiating a pay package, try not to let your ego or emotions get in the way. Remember that the figure presented is what the company can afford to pay for someone who has your specific skillset and not what they can afford to pay YOU as an individual.
You just happen to have the skillset they need. Once you remember this, you won’t let the negotiations turn into an egocentric shouting match.
It will simply be a conversation between two parties who want the same thing – you on the job. This way, you will both find a way to make that happen without one party feeling exploited or arm-twisted.
2. Remember to Actually Ask
If it’s your first time, you might be scared of actually asking for the figure and benefits you want. This is where most people go with phrases like:
- Could you make the offer better?
- What else can you do for me?
- Is it possible to get better pay?
The idea isn’t to throw out such vague suggestions but to ask for an actual figure. After all, you can’t get what you want unless you ask for it as far as salary negotiations go.
While it’s understandable that most people are afraid to ask because they might not get what they want or might appear greedy, there are a few tricks you can use to make it easier for you to ask for better pay:
- Tell yourself that they already want you at the company, and that’s why they made an offer – this must mean that you are of value to them
- You know exactly what kind of value you bring, and so does the other side
- You know exactly what you are worth, and it’s worth it to try and show the other side
3. Work to Find Common Ground
Salary negotiations aren’t about one party winning over the other. They are mainly about employer and employee finding common ground as far as compensation is concerned. Once you think of it this way, you will be far less likely to bring your ego into play. Simply look at it as a conversation to try and figure each other out:
- You want to figure out how much the company has on the budget for your skills and how much of that you can get them to give you
- The company is trying to figure out how much they have on the budget for your skills and how they can get you to accept it
When both parties want the negotiations to work, it’s much easier to find common ground, and unfortunately, this will often call for either one or both parties to concede some ground.
How to Prepare for a Job Offer Negotiation
Every prospecting employee should realize that salary negotiations aren’t about hoping that the prospecting employer will intrinsically know your worth and offer it. It’s about getting that employer to see your value based on what you can practically bring to the table and get them to pay the appropriate salary requirement.
As such, every salary negotiation session should be treated the same way you would treat a job interview – with extreme preparation. Here are some tips on how to prepare for a job offer negotiation:
1. Understand the Industry Salary Trends
As is the case in almost everything a professional does, information will be your strongest ally. When entering a salary negotiation meeting, you need to show the hiring manager that you know exactly what you are talking about, including throwing random numbers around.
You have to be armed with the right kind of data that showcases the current industry compensation landscape. A simple Google search on your current industry or profession median job salary and outlook should do the trick.
Another excellent trick is to search for in-demand jobs within your industry. Finding out that your current position or skillset is in great demand gives you more leverage when you walk into the room. Rest assured that the hiring manager will be privy to all this information, so being able to site the correct figures will highlight you as a detail and research-oriented individual, making you more valuable.
2. Have a Specific Number in Mind
There is a very good chance that you are going to be asked about your salary expectations. This means that you should at the very least have a specific salary range or a specific number in mind. You can get this number by running a quick search on your industry compensation trends.
The number you mention should factor in your experience, education, and special skills that you bring to the job. These will give you some leverage when asked to defend your position.
3. Negotiate within a Range
You should be prepared to negotiate within a salary range. While the hiring manager will ask you for a specific number (and you should give it), mentioning the salary range is an excellent idea. This achieves two things:
- Shows the prospecting employer that you are willing to negotiate and find a middle ground
- It gives you some leeway should the employer be unable to meet your original figure
Most employers appreciate working within the range, especially if they are a growing company or are currently strapped for funding.
Having a range could also allow them to offer you a potential increase in the near future that meets your higher salary expectations while allowing you to get the job on their current budget.
4. Prepare to Defend Your Position
Apart from being able to showcase the current industry salary trends, you also need to be able to show the company why you feel you deserve the amount you are asking for in your salary request. Much like in the actual interview, this means building your case around your strengths and skills.
You should be able to showcase exactly how your specific skills have helped solve an industry problem either for your previous employer. You could also simply develop a realistic scenario where your skills would solve an issue that your prospecting employer might be facing. Doing the latter can position you better to receive the higher salary for two main reasons:
- It shows you researched the company and are interested in working for them, which means you are already identifying with the brand
- It shows that you aren’t going to be just another cog in the wheel but a proactive problem solver with self-starting characteristics
Finally, showing your academic qualifications, including any additional training and certifications you may have in your industry, will show that you are better educated and skilled enough to warrant a higher salary.
5. Factor in Bonuses and Holidays
While it might sound strange or even unthinkable to some, negotiating salary doesn’t have to focus on only how much cash you take home. In some cases, where the employer can’t match or give you fair market value at that very moment, they might be amicable to offering you something else in return. This could include:
- Extra leave days
- Flexible work schedule
- Work from home options
- Better health insurance coverage
You need to remember to factor all these into the discussion and be amicable enough to accept what is desirable to you instead of an actual bump in pay. You should also factor in other perks such as retirement savings benefits or professional development opportunities – things that work towards giving you a better and brighter future.
Finally, remember to consider the company’s standpoint and get everything in writing before accepting the job offer.
Mistakes People Make When Negotiating Job Offers
As earlier stated, only 39% of potential employees ever really engage in salary negotiation with potential employers. This means that a whopping 61% of all employees either settle or reject the offers out rightly.
Both of which can be considered negotiation mistakes as far as negotiating a salary is concerned. Here are some common salary negotiation mistakes you should avoid as a job seeker:
- Settling: Simply settling or accepting what is on offer is what most potential employees do not know that they could negotiate for a better salary before accepting the job offer. Strive to be part of the 39% that negotiates their starting salary for a better figure or better perks.
- Revealing your current salary: For one thing, the hiring manager already knows the industry salary trends, which means that they have a rough number in mind. Secondly, you don’t really have to tell anyone your current salary because it’s quite frankly none of their business. Your job is to showcase your value and negotiate for a salary based on their offer.
- Not focusing on value: One of the biggest mistakes most people make, especially when they get a job offer from a prestigious company, is assume that they can now start earning like the bosses of that company.
Focusing on greed instead of the value you bring won’t get you what you want, and it might also get your job offer withdrawn. Focus on your value and how that can benefit the company, and then come to terms on how much that value is worth to the organization in terms of your salary.
- Rejecting the job offer too hastily: Granted, when the starting salary offer is way below par, there’s a good chance that you should reject it. However, if the offer is good but not quite good enough and the company can’t match your pay expectations despite negotiating, rejecting it too hastily might not be the best of ideas.
Take your time to study the entire offer, perks and all. There might just be something in there worth more to you than the money. Or at least something you can bring into the negotiations.
Finally, not being amicable during the negotiations is the worst thing you could do. It’s a conversation, not an argument.
Tips on How to Negotiate a Job Offer
Apart from being prepared and doing your research on industry salary trends, here are some additional tips on how you can successfully negotiate a job offer:
- Be clear and concise: Try not to be vague about what you want. Be as clear as possible by highlighting the things (perks and benefits) that are important and non-negotiable for you.
- Be willing to listen: Just because the hiring manager isn’t saying “yes” to every single one of your demands doesn’t mean that the company doesn’t have anything to offer you. Be willing to listen to their counter offer. You might just be pleasantly surprised by what else you could get.
- Don’t ask for too many changes: Remember, every organization has its own policies, and the chances are that they will not bend over backward to accommodate you. They might have room for adjustment, but drastically changing their offer isn’t probably going to happen. In your counteroffer, only pick the most important issues instead of nitpicking at every clause of the job offer.
- Let the hiring manager bring up the pay issue: While it’s very clear that most people go to work because it helps them pay the bills, not every hiring manager wants to know that you are just there for the money.
That’s why it’s important to highlight most other factors, such as the value you bring and how you can help propel the brand forward, as opposed to focusing on just how much you are going to get paid. It’s often best to let the hiring manager bring up compensation before imputing your two cents on the matter.
With the right salary negotiation skills, you could help improve your pay as well as your benefits. It can’t hurt to ask. Most employers expect you to negotiate before accepting or rejecting their job offers.