Should I negotiate salary? The answer to that is a resounding yes, without a doubt, and always. The first number is rarely the best number that people open with. It’s an offer that balances between it not being insulting and to the point where it will be acceptable for you.
In my first job out of college, the company offered $52,500 + a $2,500 after-tax signing bonus. Before they gave out the offer, they said they don’t negotiate for any entry level employees. I should have ignored that and negotiated anyway. They might have still said no to everything I asked for.
I still regret that I didn’t try.
When I negotiated for a car, the salesperson said “I don’t negotiate”. Then he kept on negotiating with me and going down on price. At the end of the day, you might still get a resounding no after you negotiate. That’s completely fine. However, let them reject you but don’t reject yourself.
Therefore, if you’re asking should I negotiate salary, the answer is always a yes with zero exceptions out there. The first number is never what companies should pay you. The first number is what they want to pay you.
One of the companies I negotiated with told me “we can’t go higher on the salary, we already offered too high, we even had to go to our parent company in Europe for approval”. Guess what happened when I got a counter offer that beat their salary? It’s as if by some miracle the hand of god touched me and that offer went up another $10k.
Companies lie, cheat, commit fraud, and do anything they can to pay you the least amount of money possible. It’s a sleazy and slime ball tactic but you have to deal with it.
Why You Should Always Negotiate Salary
One reason why you should always negotiate salary is by negotiating to SMASH that social share button and post to your favorite social media! Your friends might have a salary negotiation coming up that you don’t even know about. This article could potentially make them thousands of dollars, if not tens of thousands of dollars more per year.
I made so many salary negotiation mistakes in the past and the biggest mistake is not negotiating it in the first place. I can’t imagine how much money I lost by just taking what the company offered me. Don’t be like me and learn from my mistakes.
So with that, let’s get into the concrete reasons why you should always negotiate salary.
1) You Lose a Million Dollars
Your yearly salary increases are NOT based on how much value you add to your company. That would be too fair. What it’s actually based on is how much you’re getting paid today. Companies rarely increase your salary to the standard amount. They just raise your salary based on a percentage.
Whether it’s 0%, 2%, or 6%, your increases are dependent on your current salary. Therefore, you should always negotiate salary. Otherwise, it can cost you over a million dollars to just toe the line and take what they offer. Remember that doing no deal is better than doing a bad deal.
Would you rather lose a million dollars or would you rather risk a deal to make a million dollars over your lifetime? I would rather have them rescind and cancel the offer than accept a deal that really isn’t good for me. Think about your life in the long term. A couple thousand dollars a year compounds.
Just as compound interest can work for you, people can and will use compound interest against you. Especially if it is in line with their interests.
2) Companies Love Underpaying
Companies don’t care about compensating their employees fairly. Companies care about paying the least amount of money they can without having the employee leave. Should I negotiate salary? Yes, of course you should. One of my former mangers let it slip that one employee was underpaid 33% below market.
Wow, that was shocking. Thirty three percent?! You can’t get that kind of returns anywhere. If companies think that they can get away with paying you less, they’ll do it. Without a shame, with a straight face, and without giving it a minute’s thought.
They don’t care about the value that you bring. There’s a reason why the productivity – pay gap exists. Companies love getting additional productivity without giving up additional dollars. That’s their favorite past time. They do not lose a minute’s worth of sleep over paying you less than you should be paid.
3) You Will be Taken Advantage Of if You Let Them
There are many ways that you will be taken advantage of at work. However, they can only take advantage of you if you let them. No one’s going to fight for you, you’re going to have to fight for yourself. The easiest way to fight for yourself is that you should negotiate salary.
It’s their chance to prove to you that they are worthy to work for. You both can start off on the right foot by asking and fighting for what you know you deserve to be paid. If they don’t want to openly discuss and talk to you about your compensation, it’s not a great indicator of a great work environment.
When companies find out that you’re the kind to not negotiate and just accept what’s in front of you, they’ll take note. They’ll remember that the next time your annual review comes up. Some investment banking managers ask their analysts what’s the lowest bonus amount that they would take without leaving.
I can’t believe questions like that are legal.
4) The First Number is Never Their Bottom Line
When employees say “I didn’t even negotiate, they gave an offer that was higher than what I expected anyway”, companies LOVE hearing that. Even if the offer came higher than what you expected, you should still negotiate salary. No one ever opens with the big stuff.
They usually hide it to bring it up in the second, third, or fourth rounds. One of my negotiating professors advised me to ask for two things in my salary negotiation. The first thing you don’t mind getting rejected on. The second thing is what you really want. After the first rejection, the other side is more likely to budge.
I tried the tactic. They said no twice, anyway. While it didn’t work this time, that’s how it usually works in most negotiations. I gave a counter offer to one company. They retorted “yeah, we have other candidates to choose from, we’ll get back to you”. They came back and gave me everything I asked for, 3 weeks later.
Remember that they chose YOU. Even if they have other candidates, they decided you were the best one. Don’t let them emotionally manipulate you.
Don’t Listen to Others Telling You Not to Negotiate Salary
There are so many articles saying “don’t negotiate your salary”. Articles such as this. What?! No. You should always negotiate salary and there should be zero reasons why you shouldn’t negotiate salary. One such reason they list is that “you will look greedy”.
If talking about money makes you look greedy, what does companies talking about money make them?
If they mix emotions with business, they’re not really a good business. Those articles are on the company’s side for some reason. The chances of the job offer being rescinded ARE there if you negotiate salary. I’m not going to lie to you and say that it’s zero.
However, the chances that they’ll rescind the offer just like that aren’t as high as people think. The exception is if you ask for something that’s so far off from what they offered. Think like 50 – 100% off from what they offered. Then the advice isn’t that you shouldn’t negotiate.
The advice is that you should negotiate better. The ones telling you not to negotiate are on the company’s side for some reason. As a fellow employee, I want to be on the employee’s side. I had the distinct displeasure of being underpaid and it’s not a good feeling.
Sure, I worked around it by saving as much money as I can and letting my investment returns take care of the rest. However, I didn’t need to accommodate for the company. All I needed to do was ask for fair pay. My boss told me “you need to start telling us what you want”. Your employer is not going to take care of you.
You’re going to have to take care of yourself. So if you’re asking, “should I negotiate salary?” Yes you should.
Can You Lose a Job Offer By Negotiating Salary?
There is absolutely always a nonzero chance of losing a job offer by negotiating salary. Personally, no company ever rescinded a job offer because I negotiated my salary, yet. No company cancelled any of my friends’ job offer by negotiating as well, so far either.
The risk of losing the deal by asking for more instead of taking what’s in front of you will always be there. It’ll never disappear or minimize to zero. Additionally, when job offers are cancelled, it’s rarely because of you asking for more money or negotiating style. It usually has to do with other reasons.
One company cancelled a job offer after the candidate emailed “will there be time during the day for personal activities? I want to go to the gym”. The company cancelled the job offer. It could have been because it was an unprofessional request. It could have been because the company didn’t like how he wasn’t taking it seriously.
Regardless of the reason, companies will rarely cancel your job offer because you negotiated salary. While it does happen, it is rare. Do you care about the rare times when it does happen or do you care about the majority of the time when it doesn’t happen?
Keep the line of communication professional. Don’t be insulting and be polite throughout the process. Soft but firm style of communication will work wonders. It’s nothing personal, it’s just business. Keep it like that. Companies want to find a good solution that works for both sides.
They wouldn’t have invested time and resources into hiring you if they weren’t interested in you. They want you just as much as you want them.
What Salary Should I Negotiate?
So then great! You now think that the answer to the question “should I negotiate salary” is a resounding yes. So then what’s the number that you should shoot for? There are two general approaches to this question. The two routes you can take is the safe number route or the risky number route.
It completely depends on who you are and what you can stomach. What matters in the negotiation is NOT what you say, it’s how you deliver the message that makes or breaks everything.
1) Safe Number
The safe salary number is a number you ask for that has a less than 50% chance of the job offer being rescinded. It’s not insulting and it shows that there’s a common ground where you two can meet. You’re speaking English and they’re speaking English. You guys are on the same planet.
In general, it’s 15 – 25% higher than their original offer that you can ask for. One company I negotiated with increased their salary by 12.5%. Another company I negotiated with increased their salary by 20%. I was shocked that they accepted my counter without reservations.
It makes me wonder if I could have gone even higher than that. I’ll never find out but the data from my experiences seems to be that it’s safe to ask for a 15 – 25% higher pay. I didn’t even have to deliver the message eloquently or do any tricks. All I did was just ask for those things. Nothing more.
2) Risky Number
The risky number is when you have to play it very well. This is when the delivery of your counter actually matters. Things like your tone of voice, pitch, etc. Do you sound confident? Are you asking even if you don’t feel like you deserve it? Just as you have instinct, they have instinct as well.
They can smell a person’s state of mind quite well. Not perfectly, but quite well. The risky salary number you should ask for is an extra 30 – 50% higher. You may not even have a rationale but it’s what you feel the responsibilities are worth.
You should only go with this option if you are comfortable asking for such a high amount. Also if you are comfortable if they yank the offer away from you. I haven’t gone this route yet but this is an option that you can take into consideration.
Do Companies Expect You to Negotiate Salary?
Another reason why the answer to “should I negotiate salary” is a resounding yes is because companies expect you to. When you take the offer that’s in front of you, the company is happy. You accepted THEIR terms, not yours. I made so many mistakes in not negotiating salary before and the result was not good.
A study by Salary.com found that 84% of companies expect job candidates to negotiate their salary. One story I know goes like this. The hiring manager offered the job candidate $50,000. Not knowing what to do, the candidate accepted the offer. The hiring manager’s voice then turned into disappointment.
“Oh…. Great!”.
Hiring managers know that salary negotiation is a game. Companies don’t expect candidates to be happy with the first number especially when it’s on the company’s terms. Therefore, they are not going to be insulted or offended that you are wanting a higher number than the offer.
If you don’t negotiate, companies might even be disappointed. One company I negotiated with was really happy that I accepted the salary. It was way below market and what I knew I was worth. Then when I found another higher offer, I reneged on the acceptance and went about my day.
To avoid disappointing your future employer, negotiate your pay. Ask for what you would be happy with. They don’t want you to be miserable only to leave six months later. Companies want you to be happy too. Yes, they want to pay you as little as they can. However, that doesn’t do them good if you leave soon anyway.
Should I Negotiate Salary? ALWAYS
You now know that the answer to the question, “should I negotiate salary?” is always a resounding yes, without any reservations. I will always be on the side of the employee instead of the employer. Companies are winning too much these days and the income inequality gap is widening.
It’s up to us to fight for what’s fair and necessary.
I understand that negotiating is a palm sweating act because there’s a conflict of interest in both sides. However, you’re trying to get to a mutually agreeable solution that works for both. Negotiation would be so much easier if there was an unbiased umpire throughout the whole process.
However, such is not the case. With practice, you will get better and better at it. How will you know? You just know. I now know how to negotiate and I can honestly evaluate if I got a good deal or not at the end of it. It’s after about 6 years did I finally become comfortable negotiating and the conflit of interest.
I’ve met so many negotiating styles throughout this time. Once you start to get the hang of the different kinds of negotiating personalities, you’ll feel more confident. However, you can’t gain confidence unless you’re willing to actually go out and negotiate yourself.
Read about it, practice it in real life, then go back and evaluate what you should have done differently. It’s a long process but after a while, you begin to realize patterns of each negotiation. Then it just becomes muscle memory and repetition will be all it takes.
Great post, David! I regret not trying to negotiate salaries in the past when I was switching to different companies. In the sector I work in now, I don’t really have much wiggle room to negotiate. Everything is basically set and I just get a yearly raise. Since I enjoy the flexibility, I probably won’t be in position to negotiate any time soon. But I will remember this post if that ever changes.
Thank you Graham! I regret so much as well. I used to be a “I’ll take what I can get” kind of person when it came to salary negotiation… I’ve been slowly getting out of this mindset but it’s not as easy nor if I will ever get out of it as well.
Hey, there’s nothing wrong with sticking with a company over the long term!
My takeaway:
Yes! Savings is the driver, especially in the early years of working. It is nice to get solid investment returns, but those returns are the function of markets-and-risk. Savings is something the individual can control.
As for negotiations, I’ve made many mistakes. A big one was a first job, when the hiring manager asked what I expected to make. “Whatever you think I’m worth,” I said, thinking a general range; what a disappointment when he came back with a number 75% of what I expected. But I had made my ask, and negotiated myself out of money. That didn’t feel good.
When I got out of university, the U.S. unemployment rate was 10.8%. Entry level jobs were scarce, poorly paid, and there was a compression of available candidates from previous graduating classes that didn’t land anything in prior years. So, I had no leverage. My skillset took a long time to develop, and my job category was pretty fungible; there was nothing special about me, and I was 40 when I started to pull away upwards from my peers. Networking is a myth from my experience, if an opportunity opens up then peers either want it for themselves, or only want you to take it if you are still making less money than they are (never more $).
My lesson there (if I was to talk to my 25 year-old self) was to try a.s.a.p. to stand out as a strong performer, be low-maintenance, and make clear what I am looking for. Easier said than done! Saving as much as possible, developing a second income stream, and having one or two ‘next steps’ in mind, would have been beneficial.
Another worthwhile and thoughtful post, David, thank you!
No, no, thank YOU for swinging by!
Yep! It may be hard at the start but savings will definitely be the building blocks to someone’s passive income / financial independence journey.
I’ve been in your shoes before. I botched myself out of MANY negotiations. I remember a company asked me to negotiate against myself and actually name what I think I’m worth. I replied the mid of their range but told them to give me what they think I’m worth. They surprisingly countered with exactly the number I told them. Companies will use information against you at any point in the negotiation process.
That is true about networking.. In a cutthroat environment such as business friends might not become true friends when you guys are competing for the same resources.. I mean there is a thing called the selfish gene (which I think is a book as well) and you just never know!
It’s certainly not a bad idea to work on things that you can control and let external factors take care of the rest. I’ve been enjoying the benefits of a second income stream so much in the past year. Which are my stock investments finally starting to make progress in generating meaningful passive income. It can’t be discounted.
When the unemployment rate was 10.8%, did it take years before it moved down to the single digits and did that influence a lot of the job market at the time?
Thank you for swinging by, JayCeezy, I really appreciate it!
10.8% unemployment was in 1983, and that was the peak. I was going to type ‘thankfully’ and maybe I should have gratitude for that.:-) It was a crazy time when the U.S. (and all western) economy was recalibrating; manufacturing was moving to Asia and South-and-Central America, where nations didn’t have the burdens of unions, welfare-state costs, etc. and labor was inexpensive. The big example from that time was $25/hour (burdened, with benefits like healthcare, time-off, safety/legal/HR administration, etc.) for a Detroit auto line worker to put hubcaps on cars; the cost in Mexico was 1/10, literally $2.50/hour. Easy choice for corporations who’s obligation was to shareholders and not U.S. citizens.
The way the UR came down was a ‘government recalculation’ which benefitted elected officials so they would be able to tell constituents ‘hey, things are getting better.’ In 1993, the recalculation included removing anyone unemployed longer than one year. Just a few years ago, the stubborn number wouldn’t decrease so the definition of a ‘full-time worker’ moved down to 29.5 hours/week. A job at Home Depot stocking shelves counts the same as a junior accountant.
Bottom line, a wise teacher of mine impressed upon us students that the Unemployment Rate is not the percent we read/hear about. It is binary, either 100% or 0%. He told us to get and keep a job, and I have never forgotten that harsh-but-useful wisdom.
Thanks again David, am enjoying your writing style and message.
WOW. That sounds really similar to what the government is doing in calculating inflation rates. I haven’t done enough research on this but I think I read that the only reason inflation is so low is because the government is changing the definition of inflation. When you can’t organically make the numbers better… just change the definitions around!
Thank YOU, JayCeezy. I really appreciate you passing by and I am glad that my writing style is great. Feel free to let me know if you ever feel differently down the line.