Your income is the most powerful tool for creating wealth, much more than your savings and your investments. Therefore, it is essential to seek to increase it over time and ensure that you are being compensated fairly. In this context, the art of negotiation comes into play. Negotiating can be intimidating for many, but it is a skill that can change your financial life and your perspective in multiple aspects of life.
From improving your salary to obtaining better conditions on certain purchases or expenses, negotiation is a skill that we should all master. Practically everything is negotiable, and today, the ability to negotiate is essential to thrive. If you do not negotiate, chances are you are leaving money on the table, and a lot of it.
Negotiating your salary
One of the areas where negotiation can have a significant impact is on your salary. We can assure you, and practically guarantee, that no corporation is going to compensate you in the fairest way possible for you on its own, even if you are an exemplary employee.
Most companies have salary ranges for the different positions in the company, and the salaries of each employee at the time of hiring are determined based on their experience and the perceived value they can bring to the company. A large part of that perceived value comes in negotiation.
It is practically guaranteed that if you do not negotiate your salary when starting a new job, you will be in the lowest possible range. Likewise, if you do not negotiate your salary while remaining in your job for years, you will likely receive, at best, increases for cost-of-living adjustments (inflation) of 1% to 3% annually, and if anything, even if you assume more responsibilities along the way.
For example, consider a specific position in a company with a salary range between $50,000 and $60,000 per year. The job of the Human Resources person and your potential future boss is to get the best candidate at the lowest price possible, so if you are the ideal candidate and they see that they can offer $50,000 a year, they are going to do it. Remember that no company is in the business of charity, but of making money. And to do this, they look to cut expenses as much as possible. If they can have you as an employee at $50,000 a year instead of $60,000 a year, they are going to do it.
Depending on the company, they may even let go of the best candidate available due to salary expectations. However, if the candidate is within the fair range for the industry based on their research, it could be a sign that the job is not the right fit for him or her.
If you are the ideal candidate and your salary expectations are within the range of the position, you will most likely have negotiating power, especially if you are well prepared. In most cases, you can assume that the initial offer is the lowest they are willing to offer. So if your offer is $50,000 year, it is very possible that you can negotiate starting from that point.
Once inside the company
Now, if negotiating your salary involves staying at the same company; it can be a bit more challenging to achieve a significant increase, but not impossible.
Being realistic, the most effective way to obtain higher compensation is by changing companies. Today companies do not usually value loyalty to the point of offering you a truly fair compensation on their own according to the labor market, even if you are at the company for years.
On the other hand, employees do not usually remain loyal as in previous decades for the simple fact that there is no incentive to do so, like pensions in the past. It is not ideal, but it is a reality.
Improving your salary within the same company is not impossible, but it is true that it requires a more elaborate negotiation and the ability to quantify the value you bring to the company.
Negotiation Tactics
Here are some tactics to help you negotiate fairer compensation, whether in a new job or at your current one:
Preliminary Research: Before discussing your salary with your employer or potential future employer, research the salary range in your industry and your city. This will give you a solid foundation to support your requirements and also demonstrate that you are highly informed.
Highlight your achievements: Be prepared to talk about your achievements and responsibilities. Show how you have contributed to the success of the company (or your former job) and how you have excelled. If you can quantify those achievements, even better. For example, "I increased my department's sales by 25% annually," or "I closed negotiations for a deal of X amount with such-and-such client/vendor," or "I developed X tool that increased employee productivity by 30%".
Well-Founded Proposal: Present a solid proposal based on your achievements, comparison with industry salaries, and the contribution you plan to make in the future. What have you done and what can you continue to contribute to the company that justifies a salary increase or what you are aspiring to earn? Do not base it on the cost of living or that you cannot make ends meet; instead, highlight your skills, your achievements, market comparisons, and justify a fair compensation for yourself.
Flexibility: Do not just focus on the base salary. You can consider other benefits such as bonuses, remote work, extra vacation days, or even a company stock plan as part of your compensation.
Strategic Timing: Choose the right time to discuss salary. The best opportunities to negotiate are usually at the end of the fiscal year, during an annual performance review, or a very strategic moment (someone left the company and you can assume part of their responsibilities, or similar). If you have demonstrated good results, any of these scenarios can be an ideal time.
The Conversation
It is normal to feel nervous at the time of the conversation. After all, it is not a process that is usually entirely pleasant for many because it can be uncomfortable to talk about money and seem ungrateful for your current compensation (there are bosses who make you feel that way, we have experienced it firsthand), but remember, you have done your research and you know that your contributions are worth more than what you receive now. You are not doing anyone a favor, and you should be fairly compensated.
For that long-awaited moment, do not start the case with discontent or as if you are demanding something because you deserve it period. This is perhaps the worst thing you can do. The ideal approach is to show enthusiasm and interest in continuing to grow within the company and express yourself in a positive yet confident way.
Also, it is ideal if you can demonstrate how your salary increase will benefit the company. How your experience and skills will contribute even more to the growth of the company and your commitment to it.
Negotiation is a process of giving and taking, therefore we must not only maintain a positive and constructive attitude, but we must also learn to listen, receive feedback, and be willing to offer alternatives.
Remember that you can negotiate beyond your salary, and perhaps you can reach a more flexible agreement that involves both the salary part and other aspects that benefit you.
The Response
After presenting your case and demonstrating why you deserve better compensation, the moment of truth will arrive. One of three scenarios will happen here: they accept your offer, they make a counteroffer, or they deny it entirely (maintaining the original offer).
Acceptance: If the employer accepts your request, make sure not only to confirm all the details in the moment but also in writing, whether regarding salary or any other negotiated benefit. This is extremely important so that there are no future misunderstandings resulting from the negotiation. If they do not send you a written offer immediately, do it yourself by confirming what was discussed.
Counteroffer: If there is a counteroffer, which is highly likely to happen, analyze it carefully to see if it suits you or if you should pass on it. If you consider it to be well below what you expected, nothing prevents you from counteroffering again. However, be prepared to continue negotiating. If in the end they stick to their counteroffer and it is not convenient for you or you know it is not truly fair, the best thing is to accept it and start searching for your next job opportunity if we are talking about your current job; or to pass on it if it is really not convenient if we are talking about a new job.
Rejection: If you receive a negative response, do not be discouraged. Many of us have been through that. Yes, it feels terrible, but it is not the end of the world. If you really value that job and want to be there, ask if there are future opportunities to review your compensation. This is a good time to request feedback on what you can do to reach that goal. There are so many opportunities, and it is important to value yourself enough to realize that your work and your time are valuable.
Regardless of the outcome, maintain a positive attitude. Negotiation is a skill that improves with practice and experience, and if you never try, the answer will always be an implicit no.
Conclusion
Negotiation is a powerful skill that can transform your financial situation and help you build more confidence.
Negotiating your salary is key to personal and financial development, and by following negotiation strategies, you are likely to be successful when doing so. These negotiations will help you not only in future conversations regarding your compensation but also in many other areas, whether buying a car, a house, or hiring or offering a service.
We invite you to start practicing your negotiation skills. You will never know how far you can go until you try.
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