Salary negotiation

What is salary?

Before even starting with the discussion on salary compensation, let's think about why there is even the concept of "salary". What is a salary? Quick side note: the previous statement is not at all endorsing slavery or bonded labor. A salary is what the "company" (or, "business") gives back to its employee in exchange for services rendered by them that helped the company earn a revenue. However, in addition to the salary, there can be other "give-back" channels, like, stock units, quarterly/annual bonus, one time sign-in bonus, relocation allowance, etc. The company may also provide additional benefits to its employees like, covering various insurance (health, dental, vision, life, accidental death & dismemberment or ad&d, short and long term disability insurance, insurance for spouse), retirement benefits (401K, with or without match, veste over certain duration), health savings account (or, HSA), flexible spending account (or FSA, which is not HSA). The list isn't yet complete: there may be additional benefits like paid time off and sick leave (which may or may be of "use it or lose it" type), college tuition reimbursement (which may or may not include online course, certfications, online degree programs). For the international applicants, check if the company would sponsor work visa. All in all, there are many ways in which a company may "pay" its employee. Hence, when thinking about salary, one should not fixate on, well, salary, and instead aim to identify the complete "compensation package" that is provided to them by the company in exchange for the services provided by them (and just to mention again.. the service provided by them, which enables the company to earn revenue).

Why the negotiation?

The process of employment can be thought of as two parties, the employee, and the employer, or the company, coming together to generate a product / service that earns a revenue. Had these two a not gotten together, this revenue would not be generated and both the employee and the company would be at a loss in realizing this revenue. To me, this is the key realization to be had about the employer-employee relation, that at the end of day, this relation should make both the employer and the employee happier than what they would have been had this relation not materialized. This relates to salary negotiation because once the revenue is generated, it needs to be identified how it should be divided between the company as its net profit and the employee as its salary / compensation. Unfortunately, this is where the common portrayal of salary negotiation as being a zero-sum game crops up, happening both at employee's end and at company's human resource personnels' end. A line of thought that quickly gains momentum is that if the employee ends up being offered a higher salary for the position, then the company lost that profit, and if the employee did not ask for higher salary, then that drives up the company's profit. The paradox, and hence the confounding behavior of this scenario is that while the mathematics of the process fits nicely, i.e. one's gain is other's loss to take a portion from overall revenue, it doesn't account for other factors that show up on longer time scales.

Let's consider the employer-employee relation over a long time scales and consider some extremal scenarios. If the revenue is divided in a manner such that the employee gets all of it and the company gets none, then the company will not have any capital left with it to grow. That will make the company extremely vulnerable to demand fluctuations or due to unexpected macro economic issues that may cause it to go bankrupt quite soon. And now, this affects the employee who has been getting a hefty compensation because without the company, there's no venue for them to get that compensation. On the other hand, let's say all the revenue goes to the company as its profit. Low salary will leave the employee disgruntled, making them get less productive over time which then reduces the revenue, and/or hop on over to another company that is will to pay them higher for their skills which removes that revenue from happening. Hence, as part of salary negotiation, one must also think about how the other party will get affected with the decision, and how will it affect the revenue and thereby, feed back and eventually affect the first party.

Recall, as said earlier, that the employer-employee relation is a great one to be because at the end of that it has the capacity to make both parties happier than how much they originally were; And this is the crux of "salary negotiation". It is not an aggresive, zero sum game, clawing on to each other to get a bigger chunk kind of scenario. You aren't trying to demean or one-up the other person. Having such a mentality is detrimental in the long run. Instead, you want to feel happy about the relation. Both parties are trying to identify what would make them happy. Maybe the employer gets happier for having hired a leading expert in the industry, or maybe the employee gets happier with the chance to work for an employer and to learn from them. In doing so, one also needs to be mindful of any past benefits that they might have to let go off. For example, an employer might be excited to have a leading industry expert join them but they are someone critical of, say, gender wage inequality and are forcing the employer to invest more time and resources to ensure that's not the case or it is remediated. Would it still be benficial to have them join the company? On the other hand, maybe an employee gets a chance to join a prestigious company that pays a higher salary, but has almost no work life balance. Would it still be worthwhile for them to make the move? This analysis of multiple improvements versus corresponding trade-offs, any of which may be quantiative or qualitative, is what makes the process variable. This variability is what bring in the "negotiation" part of the salary negotiation, with the goal for each party to identify if they can come to a common place where both of them are happier because of this newly formed employer-employee relation.

Preparing for negotiation

As mentioned above, the salary negotiation between the two parties (i.e., employer and employee) is not a "clawing each other to death" scenario. Instead it is an exercise in identifying what makes both parties happy now, and preferably in long term. With this understanding, one should look to prepare for negotiation not by developing nerves of steel, but instead by developing an inquisitional temprament. One should identify the reason behind why is a particular condition being mentioned, and are there any arguments to support and to oppose it. The failure of a negotiation means that one of the party did not ask clarifying questions regarding the overall compensation and/or wasn't given a satisfactory answer. To me, if the two parties clarified all points and decided to not continue further because they are not a good match to each other, then that's not a failed negotiation. It is instead a successful endeavor in identifying an incompatibility that was then not pursued. My suggestion to preparing for negotiation is to look at your current lifestyle pre employment, and your new lifestyle post employment, and identify the changes. The salary negotiation is asking oneself if the "overall" changes in lifestyle are worth the changes in current to future compensation level.

Another thing to note is that this question-based "prepartion for negotiation" can get asymmetric between the company and the employee. The company has historical data regarding the questions it's been having from its previous employees, and so it is very likely to be more prepared to answer those questions. However, the employee would need to really stretch out their thought process and identify different areas that are getting impacted, how they are getting impacted and what would be a suitable compensation for that change. For this step, having resources (like, college alumni network, community, online resources) where past applicants and employees from same or different company have put their perspective is very helpful. For an employee, collecting all these questions to clarify before the salary negotiation meeting is a time consuming step. Even after the salary negotiation meeting, analyzing the response obtained from the employer and whether it compensates and/or trades-off different lifestyle changes for the employee is a hard and time consuming task. My suggestion would be to always enter a salary negotiation meeting with an intent to gain and share information, and exit it with an intent to analyze newly gained information. Never, say a "yes" or a "no" - regardless of whether the offer is too good or too bad. Give yourself time to bring the emotions down and to do a proper analysis of the overall information.

Negosh-off

Unlike the comedy scenario from where the "negosh-off" word is referenced, i.e., The Boss Baby: Get that baby!, I believe that a salary negosh-off is preparing a bunch of questions about what you'd want to clarify and a bunch of responses about what the company (i.e., most likely its HR personnel working with you) would want to clarify with you. Provided below are some of the questions that can be asked from you or what you can ask either at salary negotiation or preferably at earlier stages of discussion with the HR personnel. Also provided are some of the guidelines for formulating responses.

Negotiation vs sales

To me, this is one of the important differences that the employee should be careful about. Being human also comes with a characteristic to be swayed off with sales tactics, like, having the person sit on a comfortable chair and/or a soothing background music so they are more pliable, showering praises so they feel appreciated and want to settle with lower compensation, selling future glory rather than higher present compensation. It's not something that everyone does, but it is a tool that some may use, and so, best to be aware of it. Do note that as you and your recruiter discuss the position and the offers, both of you will unknowingly work on building rapport with each other, which opens door for emotional sways to come inside an otherwise rational decision making process. This is ok because it's how we, humans, communicate and connect with each other. However, one should be mindful of not letting emotional sways come in way of an informed and meaningful negotiation.

When in a negotiation, do try and avoid getting caught by sales tactics. Having a fixed set of questions to ask, along with self established "objective" guideline for evaluating the compensation package, and not immediately saying yes / no to an offer in the meeting is a good way to not sign a legal document based on emotions. Go back home, discuss it with someone else to get unbiased views. What do you do if you're told that the offer is something that must be done immediately else it is gone? Same thing - you leave and take time to decide. Few additional steps can also be taken during the discussion. For example, be somewhat uncomfortable for the meeting duration, either by standing up, or by sitting but not using back rest. If offered a beverage, maybe order a glass of water rather than fruit juice. Maybe have the background ambience music be turned down because its interfering with your thought process. Even better, put some sales like preparation from your side. For example, be neatly and dress up in a business-professional dress code. Do so even if negotiating via phone or video calls. This is to boost your self-esteem before and during the meeting. If doing a video call, then choose a blue background to portray your friendliness (reference for color psychology: here)

**A side note: In life, anywhere, don't sign a legal contract based on a sales pitch alone. If asked during the first sales "What will it take to get you to sign" - the answer should always be "Not signing. I'll come back". And what if said that the "offer is special and will be gone"? You still leave, take your time to analyze based on objective guidelines, get external opinion, and then return to sign the legal contract. During the signing itself, read all clauses, and if you find new clauses being added that weren't told earlier, or if you are being rushed to sign, then you cancel all signatures, leave for good and don't look back, ever.

One fabulous method to remain mindful of not getting swayed by emotional corners, is to separate yourself as the recipient of compensation / benefits, from the role of being a negotiator of the benefits. Here's how it works: When in a scenario where an offer is made to you, maybe the offer is not completely to your liking, but you have doubts like it would be wrong, greedy or selfish to ask for a higher compensation. But maybe, if it were your friend who came to saying that they got an offer and they are willing to settle at a lower value, then you'd be impelled to convince them to not do so and give them reasons on why asking for a higher compensation is justified. It is suggested to use the same trick but on your own self. Consider that you are not negotiating for yourself but for someone else ..even though you're negotiating a compensation package for yourself, but that is the trick here! If you were negotiating for a friend and the recruiter gave you a package and asked you to convince the friend to accept it, would you feel good in doing that, or would you feel that you are cheating your friend and should instead ask the recruiter to offer a higher package? This dissociation method can be used to main objectivity in the negotiation process and to not get swayed by emotional swings and human biases.

Online research resources

Goal is to research company, similar companies in area, their work culture, compensation at the company for different positions and how does it compare to compensation by other companies.
Indeed, Glassdoor , Salarylist
If in US, do a google search of "h1b {company name}". The data for H1B work visa filing is public. Check out if your company or similar ones in the area did H1B work visa filing for the past few years, and for what roles and the salary level.

Answering "What is your salary expectation?"

If asked at very early stages of interview, say that something like "I haven't fixed a range yet. However, I've seen the range provided in the job description (..if it is there) or in the online resources and my expectation is for the salary to be at market range". If still pressed for a number, have a range ready based on market estimates. Keep the range broad, with the maximum as being 20% more than the minimum. The reason for doing so is that at this point, you don't know anything about your potential future team members, specifics of job responsibility, day to day working, expectations from you in the first 90 days, other compensation details. Also, the level that gets assigned to you depends on how nicely you performed in various interview sections. This level determines the responsibility that'll be given to you, which then determines the compensation that the company would be willing to offer in return. Because of all these unknowns, an "ideal" salary estimate cannot even be identified at the initial stages of discussion with the recruiter. Hence, you should only ever give a broad range, which is enough to help the recruiters identify if you are a candidate with whom they can work within their budget levels. If you are asked about the range being too broad, then feel free to use to reason above as justification - that it's due to a lack on information on your end on why the range ou provided is wide. Generally, the company doesn't ask for the salary expectation very early on. However, if they do, it might simply be because they are also working under a budget and timeframe constrainsts and would like to focus their efforts on finding a great candidate they can afford. Nothing sinister about it.

If asked at later stages, maybe have a narrow range, with the maximum as being 5-10% more than the minimum. Why still a range? The main reason is because you still don't know how your skill levels were evaluated by the interviewers. Having a range estimate helps the company identify a good compansation package to offer.

Calculating the expected new salary

Just a disclaimer: be objective and realistic in calculation. The more realistic values go in, the more realistic it will be when it comes out. If you instead put a lot of emotion and non-realistic values, it will reflect them back.

Let's say you are in your current job. You have some emotion associated with your salary level, i.e. you're either depressed, sad, happy, ecstasic about it. Write down the salary levels in your current job that'd you would associate with other emotional levels.
If moving to a new city, use the cost of living or salary comparison tools to get a breakdown of corresponding expenses in new city. Some of the tools are: Bestplaces, Nerdwallet, Payscale, Salary.com. While one can use the new equivalent salary level provided by the tool, my suggestion is to look at the breakdown of cost increase for different categories and proportionately scale up from your current expenses. So, if most of your current expenses are in grocery, then just scale up your current expense by the cost of living percentage change for grocery. Also, instead of using the change in housing prices as suggested by the tool, go specifically to the area where you'd want to buy / rent apartment and get the corresponding change. This should give a better estimate of new expense levels.
If you're getting a higher pay, then identify the corresponding higher federal tax burden. If you're moving to a different state, then identify the difference in state tax burden.
Include one time charges like, the cost of relocation for all your furnitures, the cost of shipping your car, early lease termination. Divide it by 2, assuming you want to recover the charges in 2 year span, and then include the average annual charges. Also include the stock options and bonus provided by your current company that you may have to returnor which will not vest because you will be leaving them.
Other factors include change in weekly gas expense due to commute, change in car insurance, change in utilities cost. Generally though, it may not be much different.
Add all these change in expense to your current salary level for different mood levels, and that should give the new salary level you should expect in the new job.

Additional considerations

Job suitability: If your work experience is such that you match multiple requirements for the new role that would otherwise require hiring multiple candidates, then your eforts command a premium. If you have demonstrate success in you past efforts and the new role require similar efforts, then that can also be a point to ask for higher salary / compensation. Even better if you can provide references who can attest to the the past success. Side note: don't forget to mention it in your resume / cv and during interview discussions.
Job stability: Are you moving to a role that is not as stable as your curent one? Then the risk associated with the new role should command a premium.
Long term impact:
- Are you growing or expect growth soon in your current role? Then those would not happen if you move to new job. Is the new job providing you a one-time compensation for you taking the risk of leaving your current role and moving. If not, then is the base pay and/or desire to work in new role or company strong enough to offset it?
- On average, by how much does the job salary raise year over year? What factors control this change? Is it just something that happens at a fixed rate over time, or is it possible fo you to demonstrate your skills and thereby boost this rate? What criteria is used in identifying if the salary raise should be boosted? Is there a manager who will guide you through the process, i.e. will tell you how to work towards development in the role and salary raise? Who else are involved in authorizing the raise? Note that since you are an outsider to the company (..because you haven't joined yet), you cannot know if the company does enforce the bonus and pay raise policy. A good proxy is to take note of whether the answer you received consists of specific bullet points or if it is too generic, wishy-washy and lacking any specifics at all. Latter is generally a sign that the bonus and raise won't be frequent and/or won't be implemented using a set of guidelines. In that case, you'd want to start with a higher base salary, else it will be stuck at a lower level forever.
- Does the new job give a quarterly/annual bonus? What is the criteria used for evaluating it? How often does job salary raise occurs? A related question to ask yourself is if there's any "one time compensation" and what would replace it in a longer term. For example, maybe you are offered a lower base salary because you'll be getting a sign in bonus, or maybe because the employer is covering your relocation. In such cases, what happens to the base salary the next year? There won't be any more one-time bonus or relocation, but the base salary is now perpetually reduced, which isn't good.
What other benefits are being provided? See a broader list of benefits under the What is salary? section. Will the payments be lump-sum, or do you need to keep receipts? Just a fyi, sign-in bonus, first-year bonus and relocation expense are categories that come with a clause that if the employee quites the company within a certain time after joining or after the bonus is paid, then they'll have to return a portion of it. They are not unreasonable clauses. Note that there may be different compensation package specific to the profession. For example, in academia, new hires can ask about spousal hire and start up grant. It's always good to do some research into what are the common expected / provided benefits in your line of profession.
Lifestyle change: Will your work-life balance be affected? How's the housing market? Are there good schools and hospitals nearby? Are you ok with extra commute in a different traffic level? Maybe you want to move to the new city, or just to a big city, or a small time, or a place in certain geographic area?
Desperation: How desperate are you to leave current job? How desperate are you to get the new job? How desperate are you to work for that particular company regardless of the job being offered? Is the overall market condition such that there are few labors available and so company is willing to pay more to get new employees?
Public institutions may not provide as much flexibility during negotiation compared to private companies. On the flip side, the job position is much more secure in a public institution compared to a private company.
If you are an international, will the company file for your work visa? (=Quick side note: If your recruiter says that they do aply for work visa, then follow it up by asking if the company applied for work visas in that year, and how many applications were sent. Then do a google search on work visas filed by the company to cross check if they really did file for work visa. A huge discrepancy can signal a read flag. Maybe you'd still want to take the offer because you are desperate now. But, at least you'll be informed and can be on lookout for other options.
If you are in US and working under OPT program, then do check that the company is an e-verify employer.
Maybe you have another question specific to you and to the new position. Explain to the other party during the negotiation of what is troubling you and get feedback on what do they think about it and why. In short, work with one another and try to get as much information over all points that make you uncomfortable.

Final notes

I hope the the above information has been helpful in navigation through the important and stressful portion of salary negotiation.

Don't give any yes/no answers in the salary negotiation meeting.
Enter the negotiation with an inquisition mindset and to get to know the viewpoint of other party. The company has already spent a lot inteviewing you. If you've been extended an offer, they are looking forward to working with you. The offer won't be closed, nor would be seen in a negative light just because you have questions over the compensation.
Be respectful of each other during the discussion. A happy employee can be a great asset to the company. A profitable company can be a great asset to the employee. Also, the parties involved in the salary negotiation meeting, i.e. the HR personnel and the future employee, will be working together in the same company in future. Use this as an opporunity to build rapport.
Exit the negotiation with details that can help you in identifying if you're happy with the offer and want to accept it, or want to counter propose a different salary, or if its not a match at all.
In the end, ask yourself if you are happy with the outcome - for whatever reason it may be. Be realistic when trying to answer it. Don't be a martyr, don't fall for future promises that may never get realized. Also, discuss your though process with others who can give you independent, objective feedback and won't just agree/disagree with you, or get emotional about the process. Search for more articles about salary negotiation and not just this one. After analyzing all information, if you feel happy about the new role, take the offer!!
When signing the offer letter make sure that every point that was discussed is present. If you find any point missing, particularly regarding bonus and one time compensation, then ask for it to be included before signing it. Don't settle on the response from HR that something is a company policy and it will hold regardless because it is only the signed document that holds, and nothing else! Maybe you'd still want to take the offer because you are desperate now. But, at least you'll be informed and can be on lookout for other options.