Negotiation: Salaries, Compensation Packages and How to Negotiate

While this is one of the last steps of the job search process, negotiating is an important skill that can be used throughout your lifetime.

All of life involves negotiation. Think of negotiation as a process, not a one time event. Negotiation is appropriate when you really want the job and you feel that they really want you to take the position. When negotiating, it is important to make reasonable and thoughtful requests, and to avoid being confrontational.

SHOULD I NEGOTIATE?

When is it appropriate to negotiate? Here are some clues that the organization is interested in hiring you:

  • You have a longer than anticipated interview or you are invited back for a follow up interview one or more times
  • You are introduced to several staff members and possibly allowed time to chat with them
  • You are asked about your desired salary or your availability for training
  • You have received a verbal or written offer for the position

Once you understand the job offer and the features of the job, working environment and culture of the organization, determine what is important to you. Make a list of the “musts” versus “wants” in your career before you decide to accept the position or negotiate. Remember that negotiation is about more than just base pay; it is about managing the entire job acceptance process and weighing what you have determined is most important to you.

Keep in mind that most things are not negotiable. Many of the benefits employers provide are designed to be available to all employees. Some of the benefits are influenced by government regulations; some benefits offered, like 401K retirement programs and Medical Spending Accounts, must comply with tax laws. If you need help evaluating a job offer, or have any questions about the negotiation process, schedule an appointment to meet with a career adviser.

What can be negotiated?

Items that are typically able to be negotiated include the following:

  • basic compensation including salary and hiring bonus
  • start date, working hours, vacation and personal days
  • relocation expenses and tuition reimbursement
  • perks such as a laptop, cell phone, phone expenses or parking
  • professional development and licensure costs

Things TO CONSIDER before you negotiate

1) At the very beginning of this process, identify your key requirements – what are your “got to haves”, and what are your “nice to haves?” Make a list; discuss it with friends and family members, to make sure you understand what is important to you. This list will evolve as you get to know more about your target industry and the job market.

2) Determine how much money you will need to support yourself. You will need to estimate rent/utilities, food, transportation/commuting and clothing costs for the cities you are considering. Add in any loan payments, if you will have them. Make sure to factor in incidental or miscellaneous expenses, such as any costs associated with social and entertainment activities.

3) What if the company asks you for your desired salary? Tactically, it is best to respond to questions about the salary you are seeking with a range, such as “$45,000 – $55,000 base salary along with a comprehensive benefits program”.  Make sure that the low number you quote is acceptable to you. You can cite where you obtained this information (Career Center reports, national salary surveys, etc.)

4) Armed with knowledge of the standard salary range, and your financial needs, you can decide how to proceed. A reasonable salary increase to shoot for is between 5-10% of the initial offer. Calculate the dollar amount and provide a range respective to the percentage increase. Make sure to provide a valid reason. It should be based on your ability in reference to the job description and the industry average, not your personal finances.

Having a competing offer at a higher figure can be useful in trying to get the organization to come up a little (as long as the positions, industries and geographic cost of living are comparable).

Special note: If you are offered a job in a training program, you will be quoted a salary that all the members of your “class” will be receiving, with perhaps a $1000-$2000 bonus to reward a candidate with summer experience in the industry, an outstanding academic record, or other special qualifications. With these programs there is little room to negotiate.

5) Be sure you understand your total compensation package!   Don’t assume anything until you get all the information.

A full employee benefits package can add 25-40% to your base salary. For example, some employers will subsidize or completely pay for your master’s degree. Other important benefits to understand are vacation and sick time, health coverage, life and disability insurance, profit sharing or retirement benefits, and dental, vision and prescription plans. Some employers will also provide on-site or subsidized day care and a flexible parental leave policy. (See the Compensation Package section below.)

Some employers have a “pay for performance” program that includes stock options. While they can potentially be very lucrative, we recommend that you never “count on” stock options being realized to meet your financial requirements. See a career adviser to better understand how different types of options, or restricted stock grants, might be calculated.

Special note: If you are considering two or more actual or potential offers and need help comparing compensation packages, see a career advisor. They can help you make fair comparisons and determine next steps in your negotiation.

GET IT IN WRITING

If you haven’t received a written offer, ask for one.  If your employer won’t put the offer in writing, send them an email encapsulating everything you understand about the compensation and requirements of the position, and ask that they confirm that your understanding is accurate. A job offer should include: job title, department, supervisor, start date and benefits information.

HOW LONG DO YOU HAVE TO CONSIDER THE OFFER?

There may be a response time indicated on the offer. The length of time depends on the industry, the time of the recruiting year and a number of other factors. Understand how much time you’ll need to review the offer. If you believe that the organization is being unreasonable, immediately speak with a career adviser. It is okay to use silence and ask for time to seriously consider the offer. Make sure to communicate your response to the offer before the agreed-upon deadline. For more information, see our page on employment offers and acceptance guidelines.

Determining an appropriate comparison salary for the position

You can get very specific salary information from many sources. Here are a few we recommend:

  • The NACE Annual Salary Survey– a copy is available at the Career Center. NACE is the National Association of Colleges and Employers. They offer several other reports on compensation on their website.
  • University of Pennsylvania– the Penn Career Services reports offer detailed information on salary by industry.
  • Carnegie Mellon– the Carnegie Mellon Career & Professional Development Center offers reports with information on salary by industry.
  • WashU Career Center Outcome Data– offers starting salary ranges by year and major.
  • Glassdoor can be useful if you are looking for salaries at specific companies or by job title within an area of the country.

If you are looking at a specific field, we recommend you survey several undergraduate institutions that specialize in those fields for the most comprehensive information.  For example, for Journalism, you would want to look at Mizzou and Columbia University.

COST OF LIVING DIFFERENTIALS

When considering an offer, consider the total package, not just the starting salary, along with the differential in the cost of living.

The cost of living is the amount of money needed to sustain a certain standard of living by affording basic expenses such as housing, food, taxes, and healthcare. The cost of living is often used to compare how expensive it is to live in one city versus another.

Try the Bankrate Cost of Living Calculator to better understand cost-of-living differentials.

IS THE COMPENSATION BELOW YOUR “NEEDS” NUMBER?

What if you have just been offered your dream job, but at a disappointingly low salary?

If you are offered a salary that is near the lower end of your desired range, remain quiet during the conversation. These moments of nonverbal communication show your dissatisfaction with the offer. The person making the offer may feel compelled by your nonverbal cues to seek your feedback or improve the offer.

Express your enthusiasm for the job, but ask the employer whether or not they have any flexibility in determining the salary. Listen carefully to the response, because it will give you an idea of whether or not it’s worthwhile to pursue the issue. If the salary itself cannot be increased, you might try to negotiate for an early salary review at, say, three or six months, when you could expect a raise.

Remember, a high salary won’t make you happy if you’re in the wrong job. Don’t make your decision on financial grounds alone.

Total Compensation package

Keep in mind that your compensation includes more than just your salary. Benefits such as life insurance, health plans, vacation, retirement programs and holiday plans typically add another 20-40% to many salaries. Here are some areas you will want to understand:

  • Health Insurance: How much will you pay in monthly premiums and/or deductibles? What type of plan or coverage choices will you receive? Can you set up a Medical Spending Account?
  • Retirement Plan: Will you have a defined benefit retirement or a 401K contribution program? How much will your employer contribute to your retirement? How many years will it take to become fully vested?
  • Time away from work: How many days of vacation do you get per year? Are there sick day allowances? Will you have personal days and a flexible schedule?
  • Performance Reviews: How often are performance and salary reviews? How often will you receive performance feedback and consideration for salary increases? What are typical opportunities for career growth? How will your performance be measured? Are employees encouraged to find opportunities for growth in other parts of the organization? Are current employees routinely considered for new positions?
  • Professional Development: Does the organization provide in-house training, development and opportunities to attend outside conferences? Is tuition reimbursement provided for higher education (i.e., a master’s degree)?
  • Relocation: What are the moving policies if you have to relocate? What specific fees will be reimbursed, or will you be given a set amount of dollars to make your move and you can spend them as you wish?
  • Culture: What is the daily protocol of the organization, including dress code?
  • Lifestyle: What is a typical workweek like? How many hours do new employees work, on average? How much travel is involved? What obligations might you have outside of normal business hours?

Common negotiation mistakes

Try to avoid making these common mistakes when negotiating:

  • Talking too soon about salary and/or focusing on salary alone
  • Assuming you will get an increase after “proving” yourself
  • Asking for a higher salary because you need more to support your lifestyle choices, rather than because of market value
  • Overlooking other variables such as workplace culture, career goals, autonomy, office environment, training provided, etc.
  • Trying to negotiate things that are non-negotiable like 401(k), health, dental, vision benefits, life insurance, FMLA or other leaves of absence
  • Not getting the offer in writing

WHEN IN DOUBT…

Call or drop in to the Career Center, and ask to speak with an adviser.  You may be doing this for the first time – while career advisers have done it many times.  We advise students on these issues daily and we’d love to help you!

If you have questions or concerns about an employment offer, please contact the Career Center immediately. Our Career Advisors will help you determine if an employer is not following recruiting guidelines and will help you decide a course of action.