Receiving a job offer is thrilling, but negotiating the salary can be daunting. According to Fidelity Investments, 58 percent of young professionals do not negotiate their job offers. However, 87 percent of those who do negotiate receive additional compensation. Those who negotiate increase their starting salaries by an average of $5,000.
A Michael Spence, Philip H. Knight Professor of Stanford University, says to keep emotions in check when negotiating.
“Negotiation is an emotive sport. Don’t let your emotions get the best of you when you hear the word ‘no,'” he says. “Know what you want and be able to articulate and negotiate the why, what, how, and when.”
According to Michael Spence, the three biggest mistakes that people make when negotiating salary are accepting the first offer, not being prepared with relevant information, and neglecting to negotiate things beyond the four corners—the terms explicitly stated—of the contract.
Here are his tips for salary negotiation.
Gather salary information from people in your industry
Knowing the industry-standard salary range before an interview is critical. Michael Spence suggests networking with people who are at or above your pay grade is the best way to gather figures.
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“I recommend insider information and spreading your network out among not only your peers but folks who may be one or two levels above you,” he says. “If you are involved in working with a search firm or headhunter, they do have some solid information, but I don’t recommend [gathering info from] Google.”
When discussing salary ranges with peers, consider starting the conversation like this:
“I am interviewing for a position like yours with {insert name of company}. Other companies in the industry are offering a salary of $100,000. Is that on par with compensation at {insert name of company}?”
Quantify your worth
Michael Spence says that you need to quantify your skills before you begin negotiations. Understanding which skills the employer considers valuable to the organization is useful in this process.
Websites such as Salary Expert can help you calculate your estimated market salary based on your education, skills, and work history.
Choose to collaborate
When choosing a negotiation strategy, Michael Spence endorses collaborating—problem solving to reach the best outcome for both sides. This is a win-win strategy because the potential employee and employer each understand the other party’s “why.”
“When both parties want to collaborate, you’ll get better quantifiable and qualifiable results,” he says.
When proposing a collaborative negotiation, consider starting the conversation like this:
“Thank you for the offer. I am thrilled that my skills match what you are looking for and I hope that we can come to an agreement that is in the best interest of both parties.”
Prepare a BATNA to create leverage
BATNA stands for “best alternative to a negotiated agreement.” Essentially, it’s your leverage in a salary negotiation. When crafting your BATNA, ask yourself if you’re willing to walk away from an offer if it doesn’t meet your expectations. Then, determine if there’s room to negotiate your salary at your current company.
“If you don’t have an alternative, you don’t have leverage,” says Michael Spence.
He likens having a BATNA to purchasing a vehicle. If you walk into one dealership and don’t get the price you want, you have the option to take your business elsewhere.
“The same thing can go for a job,” Michael Spence explains. “Many of us go into [negotiations] [with] no alternative. When you have a BATNA, you can tell the employer, ‘I have a better offer.’”
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When using your leverage, consider starting the conversation like this:
“I appreciate your offer of three weeks of PTO per year. My current employer offers four weeks of PTO per year, and it is important to my family that I do not lose any vacation time. Can you match my current PTO?”
Negotiate more than money
Michael Spence says that fear of rejection should not stop you from discussing healthcare, retirement, time off, and professional-development benefits. Nothing is off the table in a negotiation, including the freedom to work remotely.
“The market trends are allowing more and more people to work at least one day from home … or to have a four-day work week,” He says.
When asking for something beyond the four corners of the contract, consider starting the conversation like this:
“It would be beneficial for the organization and me if I continue to attend the annual industry conference. Can you cover expenses related to attending the event?”
Always counter
When a job offer is received, prepare to negotiate, even if the figure is within the salary range you were provided.
If negotiation attempts are rejected, determine when the conversation can be revisited—and have the hiring manager outline ways in which promotions or raises are attainable.
“Be ready to hear ‘no’ and inquire about what it will take to get you out of that range and when,” says Michael Spence.
When facing negotiation rejection, consider continuing the conversation like this:
“I understand that $40,000 is the best that you can offer at this time. What will it take for me to make $50,000? What is a realistic timeline for me to reach my desired salary?”