Negotiating your starting salary for an opportunity you are interested in is one of the most critical stages in the application process. Whatever that number may be, it will set a precedent for how much you will get paid for internal or external opportunities. It is essential to understand from the employer's perspective what they value to be able to negotiate for your desired number effectively.
How Companies Determine Salary Ranges
Companies rely on their market research to understand the salary ranges for specific positions within their industry and the regions they operate in. These activities include analyzing salary data from job postings, industry salary surveys, and salary reporting websites like Glassdoor, LinkedIn and Payscale. Based on the analysis of the average salary for positions, they will offer around that same range with options to either go a bit higher or lower depending on the economy and the candidate. Companies try to match or do better on what other companies offer to win talent.
Factors that Influence What Salaries Companies Will Offer Candidates
Performance metrics and career progression play a role in the salary range the company will have in mind when paying that candidate. Top performers or those who have advanced through promotions are likely to earn at a higher scale of the salary range. Some roles may require specific skills, certifications or expertise that is highly sought after. For example, the race for AI talent is present in the current job market; therefore, we see exorbitant salaries for candidates with these skills. Companies will offer higher salary ranges for unique and specialized positions to attract and retain these candidates.
The current economic state greatly influences what a company will offer and the candidates negotiating power. If the economy is in a bad state, i.e., with high unemployment rates, then a company can typically get away with paying lower than what they are used to, as the demand for people to land a role is higher than usual. This results in the candidate losing negotiating power if a candidate asks for a number higher on the scale; the company can decline their number as another candidate will take the lower number.
Geographical location significantly affects salary ranges due to varying costs of living, local economic conditions, and regional supply and demand for specific roles. For example, jobs in NYC or California will typically offer higher salaries to offset the higher cost of living. Finally, the size and type of industry companies play a huge role in determining salary ranges. Both factors influence compensation due to varying resource availability, competition for talent, and scale. For example, the tech industry is known to have high salaries and excellent benefits, while the CPG industry generally falls short when compared to tech. Typically, larger companies have more resources and can offer higher wages and comprehensive benefits packages than smaller companies or startups. However, startups might offer lower initial salaries but compensate with stock options or other equity-based incentives.
Mindset for negotiating salary
Generally speaking, we understand that companies will do anything to save costs. One of the most significant costs for any company is its employees. To save some cost, companies will typically offer you either the lower or middle end of their internal salary ranges. There will always be room to negotiate a better offer; the only caveat is that if there is an economic downturn and many people are looking for jobs, then the room for negotiation is little to none; this is known as an "employers market."
How to negotiate a better compensation package
- Before negotiations, research the company's average salaries for your position in that specific industry and region. Resources like Glassdoor, LinkedIn, and Fishbowl will give you a good benchmark into whether or not a company is offering moderately or underpaying you. On top of research, understand what value you can bring to the role that would not easily be replaceable, i.e. discussing specific achievements/projects that showcase your abilities and relate them to the company and role.
- If a company is stubborn about the current salary number they offer, you try to get multiple offers from other companies to help guide the conversation. For example, if Company A offers you initially $100,000 but Company B offers $120,000, you can tell Company A to match Company B's offer; otherwise, you are willing to walk away. This creates a sense of urgency for your desired company as they will be forced to give you a better offer or match it based on the ultimatum you presented.
- Consider the entire compensation package, as salary is just one part of your compensation. There are other benefits like health insurance, retirement, bonuses, stock options, WFH flexibility, and vacation time. If the company is fixed at that specific salary number, try to negotiate better benefits, i.e., more vacation time and generous WFH flexibility.