Advice on salary negotiation is abundant, but material written for the general public may not always be applicable to a technology sector where demand is high and the most sought after talent is scarce. There is quite a bit of misinformation and the glorified mythology of negotiation is often mistaken for the much less interesting reality where little negotiation actually takes place.
Let’s start by going over a few “rules” that are often thrown around in these discussions.
Always negotiate
Using absolutes is never a good idea (see what I did there?), and there are definite situations when you should not negotiate an offer. For example, entry-level candidates who are considered replaceable with other entry-level candidates often do more harm than good by negotiating, particularly when the job being offered is among the most desirable. We will cover when you should and should not negotiate a bit later, but there are clearly some conditions when it’s not a great idea.
There’s no harm in asking for more/Doesn’t hurt to ask
Actually, sometimes it does. When you propose a counteroffer, there are only a few realistic outcomes.
- Yes, it’s a deal.
- No, but here is a compromise.
- No, we won’t budge.
- No, your demands are unrealistic and you have exposed some character trait during the negotiation process that we didn’t recognize before. We rescind our original offer. Bye.
In the first two scenarios the choice to negotiate made you better off and the third scenario is a wash. It’s the fourth scenario that is probably the least likely, but is the only one where your desire to negotiate caused you harm (particularly if this is a job you really wanted and an offer that you would have taken at face value). Companies usually won’t rescind an offer based on a request to negotiate, but the way you negotiate or reasons cited may cause an offer to be rescinded.
It is not common to see offers rescinded, but it happens often enough that anyone making a counteroffer should be well aware of the possibility before asking for more. As a recruiter, I always try to educate job seekers of this potential outcome before proposing a counteroffer, as I do not want any blame for losing a job opportunity.
If you say a number first, you lose
This one is quite popular today and comes up whenever negotiation is discussed. It’s not possible to even attempt to evaluate this statement without some definitions. Based on how I’ve heard this phrase used, we should clarify both number and lose, and mention the time when this conversation is happening.
Number in this case should usually refer to a desired salary. Some apply number to also mean any mention of current compensation, and I can argue both sides of the argument as to whether or not providing current salary is potentially harmful.
Those firmly against providing current salary say that it’s nobody’s business, and a company will just take that number and match it or maybe throw 5% on top of it. If you are unemployed and provide your most recent comp figures, perhaps they even go 5% below that number. These are possibilities, of course, but if you know the true market rate for your skills you never have to accept anything less.
I’ve provided current salary details to almost all clients for many years (at their request), and sometimes the number is accompanied by a note saying that the candidate is now being paid below market rate and it is our intent to correct this underpayment. Other times the current comp number is acknowledged as above market, with the understanding that the candidate does not expect that number to be matched.
The concept of win/loss adds another wrinkle. Most seem to define losing as not getting the absolute maximum amount a company would be willing to pay for your services. As there is no way to know this mystery figure and managers won’t reveal that they would have paid more, it’s impossible to truly gauge a win or loss on this basis. Wins and losses could be measured by salary offer relative to market rate, but information on market rate is imperfect. Most probably define a win or loss by being offered above what they were willing to accept, which of course is usually dependent upon the candidate’s self-evaluation of market rate. If the data shows that senior engineers make 100-140K, where should I fall in that range?
It is clearly not advisable to provide a salary that you would fully agree to accept before even going through the interview process. A company has the right to ask for a target, but can you be held to a number given before you were able to gather extensive information about the expectations of the job, career path, team, environment, benefits, etc.? If you are somehow required to give an expectation before an interview, be sure to add this caveat that the number is given with incomplete details and your expectation could go up (and even down perhaps) once those blanks are filled in.
Just throw out an arbitrary high number and let the company respond with something lower
This is perhaps the worst negotiating advice you can get, and will often result in no offer being provided. A company will usually dismiss even a strong candidate if they are unwilling or unable to be realistic during the process. It makes the candidate appear uninformed (at best) and unprofessional/immature, and the outcome is rarely positive. It seems most professionals know better than to do this, but I have heard enough candidates suggest this to me that it bears repeating.
All offers are negotiable
No, they aren’t. Even if all companies are willing to negotiate, that doesn’t mean that your offer is going to be negotiated. Smaller companies that don’t typically have pay bands and clearly defined ranges that correlate to specific job titles may have more wiggle room on both salary and other benefits and perks. It’s less likely that a large company can customize your vacation, health benefits, or 401k plan for obvious reasons.
When to negotiate an offer
As was mentioned earlier, there are several situations where it is useful and advised to negotiate.
When the offer is clearly below market (without other upside)
There is no reason to work for less than market rate for your skills. Market rate is difficult to define, but some research into the data and anecdotal evidence will go a long way. This is tied to your personal perception of your level as well as the employer’s evaluation, and the two may not be in the same ballpark.
When you feel you are in a secure position of strength
As opposed to negotiating just for the sake of negotiating, this is negotiating because you can and should. If you receive multiple offers, decide which job you would take if all else were equal and try to maximize that one offer. When your skill set includes something that is very rare and in high demand, you are often in a position to ask for more. Your greatest position of strength is when you:
- Possess a skill set highly desired by multiple employers
- Have multiple legitimate job offers in hand
- Are fully employed at or above market rate
Even if you only meet one or two of the requirements you still may be in a position of strength.
When an offer matches all of your criteria except one or two that break the deal for you
Often an offer will meet almost all of your expectations but falls short in one or two key areas that make it unacceptable. Someone who requires additional time off due to a family situation may find ten days of PTO to be a dealbreaker. In cases where the current offer would not be accepted due to a specific condition, there is no real loss if the offer were to be rescinded.
When not to negotiate an offer
When the risk of losing the offer far outweighs the potential gain
When the additional amount requested is negligible, it often isn’t worth negotiating if there may be risk of losing the offer. Asking for 2% on top of an offer for your dream job doesn’t seem like the reward would warrant the risk. The risk of an offer being rescinded is often measurable by the number of available candidates at the company’s disposal and the age of the offer. An offer made several weeks ago to an entry-level candidate (or anyone with a common skill set) has a high risk of being rescinded.
Sometimes I’ll work with a candidate who requests say $2,000 more on an offer. This may amount to $1.00 per hour if you do the math. In these situations, I advise my candidates on the risk/reward and let them make the decision.
When you have no data or justification as to why you are asking for more
If you are asked why you want more, can you give a reasonable explanation as to why your experience warrants the amount? This applies to people who negotiate for the sake of negotiating. The justification doesn’t have to be an incredibly elaborate study, but asking for more just because you want more might raise eyebrows. Usually these justifications will rely on market data or details of your current package relative to the package being offered.
HI, My company offers a similar amount of package at start up to all the employees, but at the start I asked for more and they offered me the same package and they increased it in the next six months which they never did for any other employee. But at the time of appraisal they offered that much less which I got in the previous six months which they normally offer to all employees. Should I negotiate in this case? One more thing is what is offered after appraisal is confidential so I can not say them you offered this… Read more »
Krishna – I’m really having a hard time following your story. I’m happy to help offer advice, but I’d want to make sure I’m giving you advice based on accurate information. Some questions: So your company offers most new hires a standard package. You asked for more than the standard. You say they offered you ‘the same package’ – do you mean the same that you asked for, or the same that everyone else gets? They increased it in 6 months, which made you the only person who got raises that quickly. Then you got an appraisal – was that… Read more »