Salary negotiations – how salary increases work
Everyone would like to earn more money – but raising the issue of salary increases in front of superiors is very unpleasant for many. Very few people know exactly how to proceed: If you come off too strong when presenting your salary expectations, your employers may be put off. On the other hand, if you are too yielding and willing to compromise in a salary negotiation, you may not get what you want or deserve. It is therefore important to consider a good strategy in advance as to how you’re going to proceed when asking for a raise.
- When do salary negotiations take place?
- The right strategy for salary negotiations
- Starting salary
- Pay rises
- Do you have a realistic salary expectation?
When do salary negotiations take place?
In principle, there are two different situations in which a salary negotiation might take place – either before being hired as an applicant or during a performance review. Depending on the scope of the procedure, the issue of money will be raised at some point during the application process. Of course, there are jobs where it is not possible to have a proper salary negotiation – management has fixed an hourly wage and applicants can either accept or choose not to accept the position. A collective wage or salary agreement makes negotiating superfluous, since the topic of remunerations has already been contractually determined.
Contracts in the US are fairly flexible, only being restricted by either statutory or a collectively agreed upon minimum wage. The two contractual partners (employee and employer) jointly agree on the starting salary. A first approximation to the negotiation might take place during the first moment of contact. Many employers ask applicants to state their approximate salary expectations in the job advertisement. This saves time for both parties – if it can be seen in advance that an applicant expects far more money than the employer is willing to pay, an interview isn’t worth having. If the expected salary and the amount the employer is willing to pay are similar, it is a good starting point for a salary negotiation to take place.
However, the word “starting salary” makes clear that it is just the first step in the salary ladder. Throughout the course of your career in a company, you will probably have the opportunity to negotiate salary increases again at later stages. It is not unusual to ask the employer to renegotiate your salary once a year. Longer service and the resulting greater experience alone can be a reason for a higher salary. If you have taken on more tasks or responsibilities in the past months than at the beginning of your employment relationship, then you can justify your entitlement to a salary increase – the same applies if you distinguish yourself permanently through excellent work performance.
General inflation can be an additional argument to increase wages and salaries. Although a pure inflation adjustment does not mean that you have more money in your account, it also does not mean you have less. However, beware: Very few employers will pay you a higher salary just because of the inflation.
Another reason for salary negotiations is if you get a promotion to a new position with new tasks and more responsibility. Your employer knows that you won’t settle for your same old salary. Before signing the new contract, salary negotiations usually take place.
The right strategy for salary negotiations
As far as the strategy in salary negotiations is concerned, it must first of all be pointed out that two parties are always involved in these negotiations. That is to say: Adapt your strategy to your counterpart. Some bosses like self-confident, bordering on aggressive behavior. Others require more diplomacy and tact. Nevertheless, there are tips that you should definitely take into account.
During starting salary negotiations, different approaches have proven to be more successful than in the later salary increase negotiations. For this reason, we have divided our tips for you.
During a salary negotiation that is happening during the application process, there is one major disadvantage: You don’t yet know your negotiating partner, so you don’t know what kind of salary they are expecting or what kind of negotiating technique they prefer. Since it’s difficult to find out about these factors within a few days, you must therefore concentrate on formulating an appropriate salary expectation that is customary in the industry during the application process. During the negotiation itself, you should not be too dogged (this is more deterring), but do not take the salary negotiation too lightly either: Your salary may increase in the following years, but only in relation to the initial salary.
Assessing possible salary ranges correctly
It is worth spending enough time on research. On the internet you will find numerous websites that show the average salaries in the various sectors and occupational fields. In the best case, you will research the company during interview preparation. On the one hand, you should be able to estimate how successful the company is in comparison to its competitors, and on the other hand, how much the company invests in its employees. On some websites, employees evaluate companies in terms of benefits and salary – such information can help you a lot in your assessment.
What factors should you consider when formulating your salary expectations? And where can you find information about the average salary? Valuable tips on salary expectations and a list of helpful websites can be found in the last section of this article.
Do not stack too low
Anyone who mentions a very low starting salary at the interview not only risks the chance of losing out on a higher salary, but also the promise of the job itself. If you state a very low salary expectation, this might make the employer suspicious. You are sending the signal that your work is not particularly valuable and you have already been rejected by many job interviews, which is why you’re offering your skills for the lowest price.
Don’t aim too high
However, the other extreme when it comes to salary expectations is just as bad. Most employers have a planned salary range which they don’t disclose (this would weaken their negotiating position). If your expectations are higher than that, you have often already disqualified yourself. Remember that you aren’t the only candidate. Although salary expectations are by no means the most important argument in the selection process, if a competitor with similar qualifications demands a lower salary, it is very likely that they will opt for it.
As an applicant, do not discuss salary issues too early or frequently
Although a self-confident appearance is never a mistake, career starters who have just completed their training or studies can focus too much on securing a lucrative salary, which often acts as a deterrent to personnel and employers. In general, the employer should not get the impression that you are only interested in the job because of the money, so don’t mention the salary too early on in the interview. In most cases, the person you are talking to will address the issue on their own anyway.
Taking into account benefits in addition to salary
Employee benefits are not just limited to the salary. Many companies also offer additional benefits that you should take into account when negotiating your salary. A thirteenth month’s salary or Christmas bonus significantly increases the annual salary and may offset a comparatively low monthly salary. You should also consider additional benefits like retirement provisions, company cars and season tickets when negotiating your salary.
In contrast to negotiating your starting salary, you have the advantage of being able to assess your counterpart better – and the other side knows you too – when asking for a raise during an existing employment. Use your knowledge to your advantage.
Taking the first step
If you are waiting for your employer to offer you a raise, you will be waiting a long time. Be proactive and address the issue yourself. This also applies to the negotiation itself: You should take away the first step and give a number – in most cases, your supervisor will ask you to do so anyway. Don’t stack the bid too low. The first number has a big effect on the final result of a negotiation. Orient your first bid on the size of the company and consider what you know about the company’s success.
They won’t approve a raise just because you asked nicely. Give good reasons and prepare them. It is not a problem to bring notes into your salary negotiation. These can even help you to conduct the meeting on a factual level. Refer to past successes, special achievements and accumulated experiences as arguments for a salary increase. Even years of company affiliation can be a reason for a salary increase – loyalty should be rewarded, after all. Private reasons, on the other hand, should not be mentioned during a salary negotiation. Even if they are sympathetic, it is irrelevant to your boss whether or not you need the money because of a change of situation in your life outside the workplace. Referring to other colleagues is also a bad idea. Just because an increase has been approved for someone else, it does not mean you are entitled to a wage increase. If you have performed well at work, then this should be sufficient as an argument in itself. However, if you argue instead that other people have a higher salary despite having a worse work performance, this will quickly make you seem unsympathetic, without bringing you any closer to your goal.
Do not threaten to quit
If they feel that they are forced into a corner or are not sufficiently valued during the salary negotiations, many employees begin to threaten their superiors with leaving. However, the supposed ace in the hole proves counterproductive. On the one hand, you are being overly aggressive (never good in a negotiation situation) and on the other hand, you are revealing your lack of loyalty to your employer. Why should your boss pay you more if you are going to leave your position as soon as a better offer comes along?
Counterbid during negotiation
Once you make your bid – as long as it is within reason – your negotiating manager will propose a counter offer. The rule is: Never accept it! Experienced negotiators first name a bid that is lower than what you are really willing to pay. With the counter-offer, your boss has proven that they are ready to negotiate. Come forward and explore what the scope for negotiation is.
Be willing to compromise
During a negotiation, you should be both self-confident and willing to compromise. At least two parties take part in the negotiation and it is not advisable to refuse to accommodate in any other way. You can prove your flexibility by accepting other remuneration instead of just a higher monthly salary: You also benefit from company tickets, petrol allowance, and employee discounts. Special leave or more flexible working hours can also be an issue in salary negotiations.
Negotiation experts recommend some tricks that you can use before or during a salary negotiation. One linguistic detail, for example, is that you should not even ask for a raise. The phrase salary adjustment sounds much less demanding. As soon as you name your first request, choose a precise, odd number. If you choose an even one, this isn’t necessarily bad, but a precise odd number will look like you have calculated your raise precisely – even if this isn’t the case at all.
You can also take advantage of the Benjamin Franklin effect: If someone has already done you a favor, that person will be more willing to continue to do you a favor. So shortly before the negotiation, create a situation where your boss is doing you a simple favor. This could make the subsequent negotiation easier. The tip to say yes works in a similar way. If you get someone to say yes several times, that person tends to agree shortly afterwards. You can create these situations during the initial small talk right before the salary negotiation. If your boss says the word “yes” several times, the probability increases that they will say the same to your demands.
Do not use the above rhetorical tricks too clumsily so that they appear strange or transparent. Keep in mind that your supervisor may also know these tricks. Your negotiating manager shouldn’t get the impression that you’re trying to trick them.
Do you have a realistic salary expectation?
An essential key to a successful salary negotiation is to formulate a good salary expectation. If you know how much your performance is worth, you can be more confident in the negotiation and minimize the risk of exaggerating or selling yourself below value. The salary you can expect depends on several factors. In addition to the industry, these are primarily the size of the company, its location, your experience, and your education.
- Company size: As a rule, larger companies also pay higher salaries. Especially companies with more than 500 employees are usually well above the industry average.
- Company location: The salary also adjusts to the cost of living, which varies from location to location. For example, an employee in New York earns more than in other US cities, but also has to pay significantly more in rent.
- Experience: Employers place a high value on work experience. Someone with years of experience therefore usually receives a much higher salary than a young professional. The same applies to the length of time they have been with the company.
- Education: Your educational level is also decisive for your salary. For example, someone with a master’s degree usually earns more than someone with a bachelor’s. Good grades can influence your salary. Continuing education also plays a role.
It is especially difficult for career starters without an insight into the industry to determine a benchmark. However, there are several databases on the internet that provide information on average salaries in different occupational fields and at different locations.
- Indeed.com: Indeed.com allows you to compare salaries for comparable roles advertised on their website. Just enter the company name or type of job you would like and see average salaries that you can use to base your own salary expectations on.
- Salary.com: Salary.com also offers a free “What are you worth calculator?” to help you compare salaries in your field. However, what makes this service stand out is that you can also add a location to your search, so you can localize your salary goals accordingly.
- Glassdoor.com: Glassdoor.com has its own salary and compensation comparison service, as well as a net worth estimation service which will help you know how much money you should be negotiating depending on your education and experience.
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