The amount of pay one makes throughout their lifetime career and the subsequent lifestyle and quality of life as a result of that income depends a lot on the amount of salary a person negotiates before their first day on the job.
This could be considered whether it is one’s first job out of college or a mid career job change. Further, there are financial consequences when you are in a career working for a company that you are even very happy with, of not doing salary negotiation at the right time.
Throughout your career, you may earn pay raises and promotions within the company that you work for, but for example, when the company offers scheduled raises, as many companies do, the impact of the starting salary with that company is huge.
This is not only applicable to your first job salary and subsequent scheduled pay increases but also to salary difference you may get when you changes roles within an employer. You may transfer into a career requiring significantly increased effort, more duties, or higher responsibilities, and the salary you had negotitated beforehand can genuinely influence the salary you earn in the new job.
As an example, imagine a person starting a new job as a QA analyst in a high tech company somewhere in America. Suppose that person begins with a starting salary of $45,000. Most likely that person will have to put in 6 months to a full year before they are offered their first pay raise. Suppose it is a 10% raise which would be HUGE at many employers. The employee would gain an additional $4500 per annum based on that increase.
Now imagine that same employee started at $55,000 or even higher. That same pay raise of 10% would provide the same person $5500 additional salary per year. With the first salary, the employee would still be under the $50,000 level after one full year of work and after a 10% pay raise, while in the second scenario the employee would be at over $60,000 per year after a 10% raise.
Now consider the compound effect of these two starting salaries on the employees earning potential. First let’s examine a 4 year horizon all things being equal (that is, suggesting no pay raises and no promotions). The person earning $45,000 will have earned $180,000 in gross salary in four years. The person earning $55,000 will have earned $220K in 4 years. That is a $40,000 differential just based on where the person starts in terms of salary.
Introduce a ten percent raise after year 1 and consider the impact as the person moves through their career. The person with a most salary in the beginning will always be ahead of the person with the lower starting salary, all things being equal (i.e. identical job, identical job performance). The person with the higher salary will be getting ahead faster than the person starting with the lower salary. This impact multiplies with each coming year assuming the same annual percentage pay raise for each.
When requesting a pay increase, if a person earning $50,000 earns a 5% raise without negotiating anything additional, that’s okay. But consider the impact if the person negotiates a 15% increase because they have really performed well in the job and they have all the supporting research and a track record to command it. That employee will have negotiated $7,500 in a raise versus just accepting $2500. Multiply that by 10 years, and there is a clear $50,000 difference in the person’s salary potential.
Many experts suggest that it is better to try negotiating a raise or an improvement to the compensation package than to simply receive the package that is offered. The first offer is often the lowest offer and can be improved with salary negotiation. This negotiation must be done with care and must be well based with a supporting case for the difference.
It must also consider factors such as market, company guidelines, and professional performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for an increase. Some people truly value time and quality of life, while others are willing to venture out and accept stock options in lieu of extra salary.
When it comes to negotiating salary, be courageous and consider requesting for more.
Trevor Davide Grant is a project manager in the IT field and has extensive experience in salary negotiation. Trevor has worked for large telecom, electric utilities, software development consulting, and a prominent social network. He has learned salary negotiating in the most powerfulway. Learn great tips on the topic of salary negotiating at www.HowToNegotiateASalary.com.
