Salary negotiations

know your own worth!

I recently spoke to a young man who had successfully negotiated a 10% raise on his contract renewal. Well done on him, for having the guts to ask, and getting it!

He had already been in the role for a couple of months, and this was not his first contract with the company. He effectively used the fact that they now knew him and his worth to them, to ask for a higher rate on his new contract.

The best time for salary negotiations is when you get offered a new job or a new contract. And although a 10% increase over the salary offered is at the top end of what you can expect, you should try to improve the package on offer. 

Up to a 5% increase should be achievable in most circumstances. To target a larger increase you will really need to be confident that your market value is well above the offer on the table. Although that alone might make you think twice about joining a company that so undervalues your skills or job category. 

So, what is the ballpark salary on offer? You should have at least some ideas of the salary that you could expect when you apply for a position. To be honest, when I applied for my first industry role I had absolutely no idea, I came fresh from university with no connections into the industry I was joining, and anything was better than my part-time cleaning job!

That was 1987 though…. Nowadays there is little excuse to be that ignorant. Some companies will actually ask you what you were anticipating before they make an offer!

You should be able to get an idea of the salary range for the position that you are applying for by searching the internet, asking friends and colleagues (or that mentor or sponsor I mentioned in a previous blog), or the professional organisations you are a member of.

Most companies will provide an expected salary range in the original recruitment advert. For government positions this is always very clear, and the room for negotiation is small or non-existent. For public and private companies there usually is some room to negotiate.

It pays to know how the recruitment process works:

  • If you applied via a recruitment agency, they get paid a hefty fee for every successful placement, usually a percentage of the candidates’ salary. So, if you didn’t go via an agency (which is definitely my preferred approach, go via a friend or your network!!!), you should be able to at least negotiate an additional couple of percent!
  • After HR sorts through all applications using the company’s own ranking process, the (technical) managers who are involved in recruiting for the position get a list of preferred candidates. From this list we usually interview 2-3 people for every position that we are recruiting for. 
  • The successful candidate will be provided with an offer when all shortlisted candidates have been interviewed.
  • By then the company has invested some serious amount of time in sourcing candidates by placing the adverts, shortlisting, interviewing, and then putting the offer package together. When I mention time, think in money terms, at least $100+ per person per hour spent! They will want to wrap the process up as fast as possible!
  • The salary package on offer is normally matching a proposed pay-grade. Each pay-grade has a salary range. You find HR often talking about a comp (compensation) ratio, which indicates how far below or above a salary midpoint for that pay-grade you are.

    The Economic Research Institute has a nice overview of common compensation terms.
From ERI – example of overlapping salary ranges and pay grades
  • There could also be added benefits, like a car, medical insurance, pension, bonus and incentive payments, etc.

Although you are unlikely to be able to change the proposed pay grade on offer, there is definitely flexibility in your particular position on the salary scale. Note that in many companies the actual pay grade is not shared with you until you have joined. There is no obligation to share that information, and although the title of the job may be an indication, those can be flexible as well!

There may be some wiggle room upwards on where you start on that pay scale. There might be an incentive scheme you could join, or you might be able to negotiate a reduction of hours or additional week leave for the same pay. Or you might be able to negotiate a sign-on bonus. 

If you are joining a company towards the end of the financial year, you may not be eligible for an incentive bonus payment or promotion that comes up annually in the new year.  You may be able to negotiate that, or at least part of that, anticipated payment added to your offer.

If you move companies and have to give up a retention scheme, this is also worthwhile mentioning for compensation.

If you need to move house, payment for or towards the house move, any temporary accomodation, a rental car, may be available. This could include the cost of selling and buying a new home to live in, often up to a specified total budget.

There is the possibility of assistance for your partner to find a new job, tickets for the family to visit the home state or country once a year, and the list goes on… A lot of these perks are subject to what is an allowable recruitment expense under the local tax rules. So ask if it would be applicable to you.

Be honest about what you are giving up by moving jobs, and what you would like to be compensated for.

Do keep in mind that there were probably 1-2 other candidates for the role you got picked for. Being successful means that you obviously must have some edge, but you don’t know how much of an edge. So do your homework before starting the conversation and be genuine but realistic!

I will add another post about asking for a promotion or salary increase when you are actually in a job! 

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