The most significant impact a person can have on their long term career earnings is to engage in negotiating salary early in their career. This will have a direct impact on the amount of earning potential they have in their future.
This might be considered whether it is your first job out of university or if it's a mid-life job change. Further, there are financial impacts when you are in your career working for an employer that you are very happy with, of not negotiating your salary with the best timing.
During your career, you may earn pay raises and job advances within the company that you work for, but when the company offers regularly scheduled increases, as many companies do, the impact of your starting salary with that employer is significant.
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.
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.
Now analyze the compound repercussion of these two starting salaries on the individuals earning potential. First let's examine a 4 year timeline, all other things being equal (that is, suggesting no pay increases and no job advances). The person earning $45K will have earned $180K in total salary in 4 years. The person earning $55K will have earned $220K in 4 years. That is a $40K difference just based on where the employee started in terms of negotiated compensation.
Introduce the 10% raise after year one and consider the impact as the person continues through their career. The person with a better salary in the beginning will always be ahead of the person with the lower starting salary, ceteris parabis (i.e. same job, same performance). The person with the higher salary negotiation will be inching ahead faster than the person starting with the lower salary. This impact accelerates with each passing year assuming the same % annual 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.
Experts feel it goes without saying that it is better to try negotiating a raise or an improvement to one's total compensation package than to simply accept what is offered. The first offer is often the lowest offer and can be negotiated higher. This salary negotiation must be done with tact and must be well founded with a supporting case for the pay increase.
One must also analyze factors such as market, corporate guidelines, and personal performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for a raise. Some people truly value free time, their quality of life, while others are willing to take a chance and maybe accept stock options in lieu of pay.
When it comes to negotiating salary, be courageous and consider requesting for more. - 15431
This might be considered whether it is your first job out of university or if it's a mid-life job change. Further, there are financial impacts when you are in your career working for an employer that you are very happy with, of not negotiating your salary with the best timing.
During your career, you may earn pay raises and job advances within the company that you work for, but when the company offers regularly scheduled increases, as many companies do, the impact of your starting salary with that employer is significant.
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.
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.
Now analyze the compound repercussion of these two starting salaries on the individuals earning potential. First let's examine a 4 year timeline, all other things being equal (that is, suggesting no pay increases and no job advances). The person earning $45K will have earned $180K in total salary in 4 years. The person earning $55K will have earned $220K in 4 years. That is a $40K difference just based on where the employee started in terms of negotiated compensation.
Introduce the 10% raise after year one and consider the impact as the person continues through their career. The person with a better salary in the beginning will always be ahead of the person with the lower starting salary, ceteris parabis (i.e. same job, same performance). The person with the higher salary negotiation will be inching ahead faster than the person starting with the lower salary. This impact accelerates with each passing year assuming the same % annual 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.
Experts feel it goes without saying that it is better to try negotiating a raise or an improvement to one's total compensation package than to simply accept what is offered. The first offer is often the lowest offer and can be negotiated higher. This salary negotiation must be done with tact and must be well founded with a supporting case for the pay increase.
One must also analyze factors such as market, corporate guidelines, and personal performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for a raise. Some people truly value free time, their quality of life, while others are willing to take a chance and maybe accept stock options in lieu of pay.
When it comes to negotiating salary, be courageous and consider requesting for more. - 15431
About the Author:
Trevor Davide Grant is a project manager in the IT field and has extensive experience in salary negotiation. Trevor has worked for large telecom, power utililties, software development consulting, and a prevalent web 2.0 site. He has learned salary negotiating in the most effective way. Learn great tips on the topic of salary negotiating at www.HowToNegotiateASalary.com.
