Salary Negotiation Guide: Why and How to do it
This article first appeared as Salary Negotiation Guide: Why and How to do it on workat.tech
You got a job offer and were expecting a bit more than what you got offered. Do you accept the offer and join the company or do you negotiate and try to get a better deal?
Let’s take a look at what is pulling you back, why you should negotiate, and how to do it and earn 10–20% more than your initial offer.
Reasons people do not negotiate their job offer
You should always negotiate. Period.
Still, most people do not negotiate. They have one reason or the other because of which they do not negotiate. The most common reasons being:
- Ignorance. You don’t know that you have an option to negotiate.
- Fear. Will the company cancel my offer if I negotiate? Will I be in bad terms with my manager?
- Uncomfortable. Negotiation is uncomfortable and awkward for you.
- Disreputable. You find it something that is below your standards and is disreputable.
- Unprofessional. You think it is unprofessional to ask for more money.
- You don’t care about money. You want to join the company only for the learning.
- Unfair. You believe that it would be unfair to the company.
- You think that the offer is already good enough.
All of these reasons might seem valid but they are not. Let’s look at why you should negotiate your job offer. I am assuming that the company is offering you less than they can and you are asking for something which is closer to what the company can afford to pay you.
Why you should negotiate your job offer
A job offer is a business deal
A job offer is a business deal. You provide your services to the company and the company pays you for it.
Like in any other business deal, the buyer (company) wants to spend the least possible money at which they can get the deal to go through. Meanwhile, the seller (you) wants to be paid the maximum that the buyer can afford to for the service/product.
It is not a zero-sum game where someone needs to lose for the other person to win. It is about coming to an agreement at a number which is a win-win for everyone.
The money that you make the company through your work is disproportionate to what the company pays you. Adding a couple of lakhs is generally not a big deal for most companies.
Hiring is expensive
Hiring is extremely expensive. The company wants you as much as you want that job if not more.
Companies struggle to hire good talent. A lot of time and effort is spent on hiring the right candidate. The number of resumes that a company gets before a successful hire is extremely high and there is cost associated at each step from resume review to the final offer.
Companies cannot afford to lose a good candidate and the huge cost associated with the recruitment just to save a couple of lakhs.
The company is not going to cancel the offer just for negotiating and so there is nothing to lose for you. Meanwhile, if the negotiation works, you will get more money every year.
Initial Offer != Final Offer
Most of the companies give an initial offer which is the bare minimum that they think you might join at. This is generally not the maximum that they can afford. They will generally have more budget for someone at your level than they initially offer.
Companies also have an upper hand as they already know your current salary and would try to offer you the least at which they believe that you’ll join.
Most candidates do not negotiate and so this a no-brainer for the companies to do. If the candidate negotiates, they are most likely to increase the offer and it makes sense for them to start from the bottom so as to keep a buffer.
They don’t care
You might think that they would find it offensive and would cancel the offer. HR Professionals, Recruiters, and Hiring Managers are used to salary negotiation. It is part of their job and they do not find it offensive or disrespectful.
Also, a couple of lakhs would not matter much to the company compared to the total money they spend on you. Your entire desk will cost more than that for the company.
Every team has a target on the number of people they want to hire and the recruiter’s incentive is also aligned towards completing their hiring goals. The business impact because of the delay in hiring a candidate can also be pretty high. They cannot afford to lose good candidates and have a setback.
You lose money
You might not care about money in the short term. You might think that the offer is good enough. You might want to avoid this uncomfortable and difficult conversation. But understand that you are not losing some money for a year. You are going to lose that money every year in your entire career. And I’ve not taken into account compounding till now.
You should know that every hike that you get during appraisals in the following years is a percentage of your previous salary. When you do a job switch, you get a percentage bump above your previous salary. The money that you are losing by not negotiating will compound year-on-year and will add up to a pretty big number in just a few years.
Do not underestimate the power of compounding.
If I was unable to convince you, read patio11’s article on Salary Negotiation. It was the article that convinced me to start negotiating.
How you should negotiate your job offer
Before getting the offer
Research. First of all, have a good idea about the market standard at your level. Also, try to find the standard compensation for your level at that particular company. You can check these out in our role and salary comparison tool.
Leave your fear and insecurities aside. Also, there should be no guilt or shame associated with negotiation. Make sure not to be rude even if you think you are never going to interact with that person ever again.
Never say the first number. This is the most important rule of salary negotiation. Do not tell your expected salary before the company mentions the numbers that they would like to offer. Try to avoid it as hard as you can. If they still press for a number, mention the average salary for your level and say that “Since your company hires above-average engineers (or any other role), you can estimate a number above that to start with. We can discuss the final numbers later”. This number should be much higher than the minimum at which you can join.
Set a range. Set a few ranges for the expected salary based on what you want and the current market standard. You should have a range for all of these types of offer: “Good Enough”, “Sweet”, “I did not expect that”. You should negotiate to get as close to the last bucket as possible. Ask for more than you want. If the company can afford it, they will give it. You have nothing to lose.
Leverage is key in any form of negotiation. Having strong leverage will help you negotiate your way to an amazing offer.
How to create leverage for a salary negotiation?
Do not be underpaid. Companies generally give you a percentage hike over your previous salary. Having a high salary at your current company will help a lot. Being underpaid can keep you at a disadvantage. Work on other forms of leverage to overcome it. If you are supposed to get a promotion or a good hike at your current company, mention it and see if it helps.
Prepare well for the interview. Your interview performance can be very good leverage during the negotiation. No one wants to lose a rockstar candidate.
Assert your value. Everything that you have previously worked on and the impact that you’ve created in your previous roles combined with everything that your interviewers mention about their product and the problems they solve can help you assert the value that you can provide to the organization.
Have multiple offers. Most offer letters come with a time bomb of ~3 days. You are required to either accept or reject it within 3 days. This is unfair to the candidates as it does not allow them to decide between multiple offers. To overcome this, try to schedule all the interviews closer to one another so that you get all the offers around the same time. Competing offers provide you one of the highest forms of leverage during the negotiation.
After getting the offer numbers
Be bold. If the offered salary is below market rates, mention it and say that you are being hired to provide more value than an average person at your level and so a below-market salary does not make sense.
Show interest. I am assuming that you really want to join that company. You should, at no point during the negotiation, make them feel that you do not wish to join. Assure them that you are very excited to join but you still have to think between the current offers that you have. If the offer had been ‘y’, it would have been a no-brainer for you.
Try to negotiate over email if possible. This will help you get time to frame your responses and tackle uncomfortable situations. You might not be much experienced with salary negotiations but the Hiring Manager or the HR definitely is.
Buy some time. As soon as you get the offer (numbers), do not mention whether you like it or not. Mention that you need to think about it and that you need to discuss it with your family. Mention that you will get back in a day or two. This will also allow you to initiate the negotiation over email.
Negotiate other components. Few companies like Microsoft and Google do not negotiate a lot on the base salary. In these cases, try to get more stocks, joining bonus and/or relocation bonus. They will agree to it pretty easily.
Common pitfalls and how to avoid
HR: But you mentioned that you wanted to join for learning and not for more money.
Solution: “I obviously want to join for learning but not at an offer which is way below the value that I bring on the table.” Then assert your value and mention the market standard.
HR: But we already gave you an x% hike above your previous salary.
Solution: “I was underpaid for ‘some reason x’ but do not intend to stay that way.” Then assert your value and mention the market standard.
HR: But you do not know the technologies that you will work on and would spend time on learning.
Solution: “I am sure that I am being hired for a highly-skilled role where everyone in the team is a good learner and need to learn new things on a daily basis. So it should not be a big deal for me to do that as I’ve consistently done that in my previous roles as well.”
HR: But this is the maximum that we can offer.
Solution: “I was really excited about joining the team and creating an impact through the upcoming projects. But I do not intend to join at an offer that is way below the market standard and the value that I will bring to the team. It was nice talking to you and others in the team.”. Assert your value and show that they are losing a lot by putting this cap.
I hope this guide was helpful to you. Please share it with your friends who might benefit from it.
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