“Knowledge is power.” Sir Francis Bacon
What’s the best time to get a raise? Would you say after 6 months on the job? After a year? After completing a major project? Oddly enough, the best time to get a raise is before you even start the job. When you have received but not accepted a job offer is the best time to negotiate higher pay. You are in a position of power because the employer wants you in the job and risks losing you if they do not make the compensation and benefits package attractive enough. If you walk away from the offer, they are back to square one. They’ve spent several months interviewing candidates and conducting reference checks. They’ve eliminated other candidates and selected you as the best candidate. They most definitely do not want to start over.
In order to negotiate a market-competitive salary you must first: 1) understand how most companies determine rates of pay, 2) determine what the external labor market pays for the job that interests you. I’m going to share my 15 years of compensation experience with you. You may be surprised at how easy this simplified process I’ve developed for you is. Anyone with basic math skills and access to salary survey data can come up with a reasonable approximation of a salary range and starting salary.
First, you need a job description. This is usually in the job posting or advertisement. Once you have a job description, you can search through publicly available surveys for matching job titles and descriptions. Match the jobs based on the descriptions, not titles since titles can vary widely. Make sure you pay close attention to the job qualifications. If the job requires 2 years of experience, match it with a job requiring 2 years, not 5 years experience, since experience can make a big difference in pay. Next, once you’re reasonably sure you have a good survey job match, look at the survey salary data. If both median (50th percentile) and average are available, choose the median salary for the job. Why is this? It’s simple – because the average is more susceptible to “skewing” or distortion by large differences in salaries. The median is the middle value if you arrange all salaries from low to high. It is therefore a better measure of central tendency. If the median isn’t available, the average is perfectly acceptable.
Once you’ve gotten one median salary, aim to find other survey job matches. Ideally, you should have 2 to 3 survey matches to accurately market price a job. Pay close attention to geographic area on the survey. In most cases, unless you are an executive, will want local or regional survey data. What a job pays in New York is usually not relevant to what it pays in Michigan. Also, pay attention to the effective date of the salary data. If it’s a year or more old, you can “age” or “trend” the data to bring it up to date. Recent local Detroit area surveys have shown year-to-year base salary growth of approximately 2% for most jobs, so I would increase the data by 2% per year. However, don’t use data more than 2 years old, since labor markets tend to change over time.
When you’ve selected your survey sources, you can put them in a simple excel worksheet to calculate averages and percentages. You can also do these calculations on a sheet of paper. First, calculate an average for your survey market data. Once you have that average, you can calculate an approximate salary range. For example, let’s say the average is $50,000. Since many employers use a salary range with a 50% range spread (difference between the highest and lowest salary), you can calculate the range minimum by multiplying the average by .80. In this case, 50,000 x .80 = 40,000. To calculate the range maximum, take the average and multiply by 1.2. In this case, 50,000 x 1.2 = 60,000. You’ve just calculated your first salary range. Minimum: $40,000, Midpoint $50,000, Maximum $60,000. Most employers develop their salary ranges by collecting market data on all their jobs, then arranging them in a hierarchy from high to low and calculating salary grades then slotting the jobs into the grades. Usually, salary grades will increase between 10-20% from midpoint to midpoint. That means a job that’s one grade higher will pay on average 10 to 20% more at market median.
The employer’s salary range will probably not be identical to the one you’ve developed, but it’s likely that if the employer’s HR staff knows what they are doing, it will be close. To determine a starting rate for the job, if you just barely meet the minimum requirements, I’d expect to be between minimum and midpoint and would target a number slightly below midpoint. If you surpass all the requirements, you should probably aim for a salary close to range midpoint. Please be aware that most employers won’t bring you in above range midpoint, so don’t aim for it. You are likely to be disappointed and price yourself out of the salary discussions.
The following are examples of the process described above.
Position: Support Technician I
Description: The Support Technician provides installations, modifications, and minor repairs to personal computer hardware and software systems in use by staff, faculty, classroom labs, and provides technical assistance and training to system users. This position focuses on end user support.
| Help Desk Technician |
|
|
|
| Survey |
Position |
Min. |
Base 50% |
Max |
| Salary.com |
Help Desk Support |
|
47,135
|
|
| DOL Michigan |
Computer Support Spec. |
|
56,400
|
|
| Adecco Guide |
Help Desk Spec. |
|
44,400
|
|
| Estimated salary range: |
|
39,449
|
49,312
|
59,174
|
| Estimated hourly pay range: |
|
18.97
|
23.71
|
28.45
|
Position: Administrative Assistant II
Description: Performs a broad range of secretarial duties or typing assignments for a mid-level executive. Performs advanced confidential secretarial duties, working within established parameters. Prepares correspondence, memoranda, reports, etc. Composes routine-correspondence. Screens telephone calls, receives and directs visitors and may resolve routine inquiries. Schedules and maintains calendar of appointments, meetings, and travel itineraries, etc.
| Administrative Assistant II |
|
|
|
|
| Survey |
Position |
Min |
Base 50% |
Max |
| Salary.com |
Administrative Assistant II |
|
42,400
|
|
| DOL Michigan |
Adm. Asst/Exec. Secretary |
|
41,600
|
|
| Adecco Guide |
Administrative Asst II |
|
40,500
|
|
| Estimated salary range: |
|
33,200
|
41,500
|
49,800
|
| Estimated hourly pay range: |
|
15.96
|
19.95
|
23.94
|
Possible sources of salary data on jobs:
- Salary.com — Surveys companies and publishes survey data. Also aggregates survey data from other published surveys.
- Bureau of Labor Statistics — U.S. DOL conducts surveys of corporate payroll data.
- SalaryExpert.com – self reported salaries by employees (use with caution).
- PayScale.com — collects salary data directly from employees (use with caution).
- Robert Half or Adecco Salary Guides – give salary ranges for common financial and IT jobs.
- CareerJournal.com — has articles about salary trends.
- Industry Salary Surveys – (check effective date and geographic area)
To convert an annual rate to an hourly rate, use the standard computation of annual rate divided by 2080 = hourly rate. Why 2080 hours? 40 hours x 52 weeks = 2080 hours/year. To convert an hourly rate to annual, simply multiply x 2080. Even for hourly jobs, surveys usually report annual rates of pay based on 2080 hours per year.
I must include a word about salaries and hourly pay. Although most surveys report annual salaries, I’ve converted both of these pay ranges into hourly rates because I believe they are in fact what the government calls “nonexempt” jobs. According to the Fair Labor Standards Act of 1938, all jobs except those that fall into one of the following exemptions need to pay an hourly rate plus time and a half overtime for any hours over 40 in a workweek. Employers sometimes erroneously classify employees as exempt because it is cheaper and some of the laws are confusing.
Exempt jobs (that don’t have to pay hourly or overtime) are the following:
1) Executives and Managers that supervise two or more full time employees.
Supervisors who hire/fire and manage performance also qualify.
2) Learned Professionals who require advanced education such as lawyers, doctors, teachers, architects, engineers and pharmacists.
3) Creative Professionals—including performers such as musicians and actors, graphic artists and possibly journalists.
4) Outside Salespeople – who call on the customer at the customer’s place of business.
5) Computer Professionals – such as systems analysts and programmers. Additional minimum pay requirements apply.
6) Exempt Administrative employees who
- Perform office or non-manual work
- Directly related to the management or business operations of the employer.
- Who perform work that requires independent judgment and discretion about matters of significance? Translation: they make important decisions.
As you can imagine, the most troublesome exemption for employers is the Administrative Exemption. Administrative in this sense does not mean clerical.
The Department of Labor (DOL) considers clerical work or operating a computer to be manual work and therefore nonexempt. There are other requirements for exempt status such as a minimum salary that cannot be subject to reduction because of quantity or quality of work. For additional information on the subject, you may consult the U.S. Department of Labor’s website. Penalties for misclassifying employees and underpaying overtime can be quite severe. For non-willful violations, if the employer failed to pay one hour of over time, the employer would owe double what they failed to pay (1.5 hours x 2), or 3 hours total. For willful violations—situations where the employer knew they were violating the law and continued to do so —triple damages and possible jail penalties are possible. For additional details, you may consult the U.S. Department of Labor’s website at http://www.dol.gov.
There is no limit to the number of hours your employer can require you to work. However, if you are nonexempt, the employer must pay you for working over 40 hours per week. If you are exempt, the employer does not need to pay you for additional hours since you are paid a fixed salary to do the job, rather than by the hour. After the mass layoffs of the current recession, employers often required the recession “survivors” to do the jobs of 2-3 people. This is because 1) exempt employees don’t need to be paid overtime and 2) paying overtime to nonexempt employees is cheaper than hiring additional staff.
If you receive a salary offer for what is clearly a nonexempt job, be careful. If overtime isn’t required, an annual salary will be equivalent to an hourly rate. On the other hand, if large amounts of overtime are required, the employer could be taking advantage of you. Few people would like to work 60 or more hours a week in a low-paid clerical job that pays for only 40 hours. Your only way of recovering payment for unpaid overtime would be to file a Department of Labor complaint. If that happens, don’t expect a Christmas bonus.
Negotiating a Fair Compensation Package
Have you ever started a new job, only to find out your colleagues are all paid at least $10k more than you are? If you start low, you will never catch up with your peers. I’m going to educate you about the well-kept secrets of getting a fair starting salary.
Now that we’ve covered how to determine a fair rate of pay for the job you are applying for, let’s discuss salary negotiation. Often, one of the first things an employer will ask you in an interview is, “what are your salary requirements?” In any negotiation, the first person to answer the salary question usually loses. The first commandment of salary negotiation is “thou shalt not speak too soon.”
If you give them too low a number, you are shortchanging yourself, but if you give them too high a number, you will price yourself right out of a job–hence, the importance of the market pricing exercise we completed above. In addition, if you give your salary requirements up front, the employer will likely focus on whether you are worth $70k, for example. If candidate A says $70k, candidate B says $50k and candidate C says $40k, they are bargain-shopping for the lowest priced candidate and will likely choose candidate C. Your objective during an interview is to delay the salary discussion so you can sell the hiring manager your skills, experience, and capabilities.
You can respond to salary expectations questions by saying that you are flexible and would prefer to wait until they’ve established that you are the best candidate for the job before discussing salary. You can also ask them whether there is a salary range. Often, they will share this with you — usually only from starting rate up to midpoint—or their highest starting salary. Sometimes, however, they won’t share a salary range. What do you do then? If pressed, you can say you expect to be paid “equitably in relation to my peers and the external labor market for the job.” This is an excellent answer because the goals of most compensation programs are internal equity and external labor market competitiveness. It answers the question without giving a specific number. Since you have no information on their employees’ rates of pay, you must base you estimate on publicly available survey data. If they continue to press you on the salary, you can give the number you’ve carefully researched. This should fall somewhere around midpoint of the salary range for the job if their HR department has done a good job.
If you give a salary requirement during the interview, make sure you can live with it. HR people think there’s a special place in Hades reserved for candidates who give one salary requirement during the interview and a higher one after the offer.
When you receive a “low” offer at a specific salary or hourly rate, it’s important not to say, “OK,” or you risk sounding as though you’ve just accepted the job. A good negotiating tactic is called “the Flinch.” In response to their offer, you say only one word — “hmm.” Then you mentally count out 30 seconds and don’t say a word during that time. The pause is absolutely critical; it will make them uneasy. You can then respond, “Of all the interviews I’ve had, this is the job I want and I would be honored to work for your company, but I was wondering if there’s any room for flexibility? I was really looking for $50,000,” for example. If you’ve done good research, the chances are you will get the salary you want or they will at least meet you halfway. They have too much invested in you to go back to square one.
Please note that you have not turned down the job at this point. You’ve simply asked whether there is room for negotiation. The HR Representative will likely respond that they need to check with someone for approval and will get back to you, or they will say, “That’s our best offer.” If the Representative says “That’s our best offer,” you can thank them, say you need some time to consider the offer and give them your answer in a reasonable period of time – usually a day or two. If you receive an offer that’s fair based on your research, take it. Don’t keep pushing for a higher salary or you may lose out on the job entirely.
If there is no room for negotiation on the salary, perhaps you can negotiate a bonus, additional vacation time, unpaid time off, or flextime. When asking about a bonus, ask, “what’s the bonus for this position?” rather than asking whether there is a bonus.
Don’t shortchange yourself by not negotiating a fair starting salary. You have nothing to lose by negotiating. At any rate, once you receive an acceptable salary offer, you should always ask to consider the offer overnight. This is an important decision that will affect your life for many years and deserves careful consideration. It’s important to ask for written confirmation of the offer. Any reputable company will provide a written offer letter. If they don’t, you should be very skeptical about the company and send your own letter confirming the terms of the offer. If you have no written offer letter, what happens if you show up on day one and your boss has left? It happened to a friend of mine.
In my experience interviewing candidates, I found that far more men than women negotiate salary offers. About 80% of the time, the candidates who negotiated got the amount they sought. Perhaps an additional 10% got an amount between the original offer and their goal. You can get the best offer by knowing your worth, delaying the salary talk, targeting midrange, negotiating benefits, and getting the offer in writing.