The amount of compensation 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 salary negotiation and subsequent incremental pay raises but also to salary differentials you may get when you changes roles within a company. You may switch into a job requiring significantly increased duties, effort, or responsibilities, and the salary you had earned beforehand can genuinely influence the starting salary at the new job.
Take for example a person starting a new job as a business analyst in a software company somewhere in the US. Say for example 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 increase. Suppose it is a 10% pay raise which would be SIGNIFICANT in many companies. The employee would gain an additional $4500 per year because of 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 salary band after one full year of work and after a 10% increase, while in the second situation the person would be at over $60,000 per annum after a 10% pay hike.
Imagine the compound impact of these two starting salaries on the person's earning potential. First let's examine a four year timeline, all other things being equal (that is, assuming no pay raises and no promotions). The employee earning $45,000 will have earned $180K in gross salary in four years. The person earning $55K will have earned $220,000 in 4 years. That is a $40,000 difference just because of where the person started 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 negotiating a pay raise, if an employee earning $50,000 earns a 5% raise without negotiating anything extra, that might acceptable. Now consider the impact if the person gets a 15% pay raise because they have been a superstar in the job and they have all the supporting market facts and a performance record to justify it. That employee will have negotiated compensation - $7,500 in an increase versus just accepting $2500. Project that 10 years into the future, and there is a blatant $50,000 impact on the person's earnings.
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.
We must also consider factors such as the job market, company guidelines, and on the job performance. However when well executed, it can really pay off. Remember to consider the importance of all factors of compensation when in salary negotiation. Some people truly value their spare time and quality of life, while others are willing to venture out and accept stock options instead of extra salary.
However, when it comes to salary negotiation, don't be afraid to consider asking for more salary. - 20785
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 salary negotiation and subsequent incremental pay raises but also to salary differentials you may get when you changes roles within a company. You may switch into a job requiring significantly increased duties, effort, or responsibilities, and the salary you had earned beforehand can genuinely influence the starting salary at the new job.
Take for example a person starting a new job as a business analyst in a software company somewhere in the US. Say for example 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 increase. Suppose it is a 10% pay raise which would be SIGNIFICANT in many companies. The employee would gain an additional $4500 per year because of 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 salary band after one full year of work and after a 10% increase, while in the second situation the person would be at over $60,000 per annum after a 10% pay hike.
Imagine the compound impact of these two starting salaries on the person's earning potential. First let's examine a four year timeline, all other things being equal (that is, assuming no pay raises and no promotions). The employee earning $45,000 will have earned $180K in gross salary in four years. The person earning $55K will have earned $220,000 in 4 years. That is a $40,000 difference just because of where the person started 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 negotiating a pay raise, if an employee earning $50,000 earns a 5% raise without negotiating anything extra, that might acceptable. Now consider the impact if the person gets a 15% pay raise because they have been a superstar in the job and they have all the supporting market facts and a performance record to justify it. That employee will have negotiated compensation - $7,500 in an increase versus just accepting $2500. Project that 10 years into the future, and there is a blatant $50,000 impact on the person's earnings.
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.
We must also consider factors such as the job market, company guidelines, and on the job performance. However when well executed, it can really pay off. Remember to consider the importance of all factors of compensation when in salary negotiation. Some people truly value their spare time and quality of life, while others are willing to venture out and accept stock options instead of extra salary.
However, when it comes to salary negotiation, don't be afraid to consider asking for more salary. - 20785
About the Author:
Trevor Davide Grant is a project manager in the IT field and has extensive experience at salary negotiation. Trevor has worked for global telecom, electric utilities, software development consulting, and a prevalent social networking website. He has learned how to negotiate a salary in the most effective way. Learn great tips on the topic of salary negotiating at www.HowToNegotiateASalary.com
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