“There are only two situations in life where you can make $10,000 in 10 minutes simply by asking for it. One of them is when you're robbing a bank. The other is when you're negotiating a job offer. I know you hate negotiating because everybody is getting along and being nice, and you don't want to rock the boat. But trust me and be the bad guy for just a few minutes. It's the fastest $10,000 you'll ever make in your life without risking going to jail.”
—Recruiter who has definitely considered robbing a bank
Your Brain Is Stupid
Congratulations! You now have an offer in hand. Big decision time. How much are you willing to pay to avoid having a single conversation about salary before you start?
Does that seem like a silly question? Do the numbers in options A through D seem ludicrous?
Well, they're not. In a 2019 survey of more than 50,000 job seekers on ZipRecruiter, 64% reported accepting the first offer they received, which means they chose one of the preceding answers.
The median salary in America is $56,000, and the average person holds a job for four years.1 Negotiating for just 5% more during the initial offer is an additional $2,800 per year. That’s almost $11,000 more over the lifetime of the job and that’s without assuming you get annual raises!2
I get it. For most people, negotiating is painful. It's not your fault. It's how your brain is wired. We all suffer from what's known in behavioral economics as the “endowment effect.” In simple terms, our brains ascribe heightened value to something once it becomes ours. Within minutes of owning something, we embed it into our sense of self, and the idea of losing it becomes a threat to our identity. In other words, you're so afraid of losing that job offer, you've gone into fight or flight mode. To your muddled brain, negotiating might cause the employer to rescind the offer.
Let me reassure you that your brain is stupid. Employers do not rescind job offers because you ask for more. (They only rescind job offers if you're being an ass about it.) And oh, by the way, did I mention that employers who give you an offer are also affected by the endowment effect! They have stupid brains just like you do. Once they've made an offer they are as afraid of losing you as you are of losing them. Internalize this! Negotiating will not scare them away.
“I was hired onto the HR team several years ago. I accepted the $50,000 offer they gave me, and I was really excited because it was $10,000 more than I was making at my old job. My role was expanded this year and I got access to the HR files of all the employees at the company. Turns out I'm the lowest-paid person on the HR team by $15,000. I haven't been treated unfairly. I just started at a lower base. It burns me up inside because there is no redo button for the last five years.”
—Employee rethinking every decision they've ever made
You Get What You Negotiate
When it comes to negotiating, Americans don't have many opportunities to practice. In our world, products and services are neatly labeled with bar codes and set prices.
You might think that jobs work the same way. And some jobs do. For example, there are rigid pay scales in the military that depend on rank. Likewise in government jobs where salaries are set by law or regulation. Even in the private sector, there are some jobs where you may not have room to maneuver like, say, if the industry is unionized or wages are paid hourly.
But the fact is that pay in most salaried jobs is set by negotiation. And that makes sense, once you think about it. In most companies, especially at the corporate level, there are no two people in the exact same job. That means there are no set pay scales—just ranges.
You have leeway. Let's make the most of it.
Negotiation Is Expected, and Priced into the First Offer
“I'm stunned by the number of people who accept the first offer. I'm tempted to be their career coach and say, ‘That's really nice of you to accept so quickly, but actually, we're willing to pay you more.’ Of course, I don't because that's not my job. It's one of the areas of life where nice guys finish last.”
—HR manager who really wants to coach you
About one-third of all job candidates attempt to negotiate a job offer. Employers know this, but don't know which third of candidates will be the ones to try. As a result, they discount first offers by around 5% to 15% for ALL candidates. It's a rational strategy. So if you want to get paid what the employer really thinks you're worth, you have to negotiate. But what is the right number to ask for?
This information is really, really, really easy to find. Just go to www.ziprecruiter.com/Salaries. Enter the job title you've been offered and you'll immediately see the range of what real companies in your geographic region are paying for the same role. Spending five minutes doing this research will equip you with the data (and hopefully the confidence) to make at least one counteroffer without worrying about seeming unreasonable.
They Can't Guess What You Want
“Before I back down in a salary negotiation and accept the employer's offer, I submit my ‘pity list.’ It's the list of things that I care about that they probably don't, for which I say, ‘Well, if I'm going to accept this offer that's lower than I think I deserve, the least you could do is give me a few extra vacation days, or a work from home day,’ or whatever else I think they're willing to give on to finalize the deal.”
—Employee who loves making lists
Before you enter a negotiation, you should ask yourself: What do I actually want?
It might seem obvious, in this context: You want a job, you want money, and you need a place to make free photocopies.
But there are other things that are important, too.
You may be looking for a flexible work schedule so you can balance work and family life. Maybe it's more vacation time if travel is important to you, or moving expenses if you are relocating for the new position. It could be a business card with a title that includes the word “Senior,” or a great parking spot, or the ability to bring your dog to work.
All of that is negotiable. But some of those “wants” are more important than others.
Before any negotiation, make a list of your priorities, from top to bottom. If you can't get everything you want in a negotiation, the trick is to trade something at the bottom of the list for something really important at the top.
Don't Negotiate Against Yourself
You know what's worse than not negotiating? Negotiating against yourself!
Here are some practical tips for avoiding the most common negotiating mistakes inexperienced job seekers make while asking for more compensation.
Tell Employers You're Interviewing Multiple Places
Do you know the most effective tactic for inducing employers to increase an initial offer? Get multiple offers! The more jobs you apply to, the better chance you have at starting a competition for your services. Even if you have a “favorite,” don't let that stop you from continuing to interview as many places as possible.
And here's the thing: you don't need to have multiple offers to trigger auction effects. Just telling employers you're interviewing at other companies is incredibly powerful. The more they like you, the faster they'll try to lock you down, and that includes meeting the price you name. Speaking of naming your price …
“My father told me, ‘When you name your price, you should feel nauseous. If you don't feel nauseous, then you're not asking for enough.’”
—Employee whose dad wants to make them sick
Contrary to conventional wisdom, there is great benefit in giving the first number in a negotiation and more importantly, going above whatever it is you really want. This is what's known as an “anchor”—the number to which all others refer. Anchoring is a cognitive bias in which we unconsciously rely too heavily on the first piece of information we receive, and it clouds all future judgments. Retailers exploit this bias all the time. That's why you see the “original price” crossed out on a price tag, above where the “sale price” is displayed. (There is no such thing as an original price. All prices are made up.)
The same is true of employers. If you are looking to make $75,000 in a new job, ask for $95,000. Psychologically, $95,000 will become the anchor. If the hiring manager negotiates you down to $80,000, they will feel like they negotiated successfully and got a candidate worth $95,000 for less. The higher the anchor you set, the more room there is for both of you to win.
If the employer gives a number first, just remember how the psychology of anchoring works. Don't get dragged down by their anchor! If they go low, politely give a number back immediately, to re-anchor the negotiation higher. At a minimum you're creating a range.
Don't Automatically Accept the First Offer
The majority of job seekers we've interviewed have told us that when they did negotiate, they were able to increase the starting offer by at least 10%.
You don't have to accept the first number an employer throws out. You can always ask for more. Do it. That ten-minute conversation could be worth more than $10,000 a year.
· You must negotiate! Don’t let the “endowment effect,” or fear of losing the opportunity, stop you.
· Employers expect you to negotiate, and build that expectation into their initial offers.
· You can negotiate many things besides money, such as vacation, your schedule, and more.
· If you have multiple offers, employers will often feel pressure to hire you before someone else does and to sweeten the offer.
· “Anchor” by asking for a higher salary than you need so when you negotiate, you are starting from a higher number.
· Don’t automatically accept the first offer. If you ask for more, you just might get it.
1. 1. “Employee Tenure in 2020,” Bureau of Labor Statistics, September 22, 2020, www.bls.gov/news.release/pdf/tenure.pdf.
2. 2. Amy Stewart, “PayScale Survey Reveals the Compensation Best Practices of 2020,” PayScale, March 11, 2020, www.payscale.com/compensation-today/2020/03/payscale-survey-reveals-the-compensation-best-practices-of-2020.