Compensation: Negotiate beyond money

On April 24, 2023
Compensation: Negotiate beyond money

Question

I recently decided to leave a Fortune 100 company after nearly seven years. I accepted a generous severance package and have just been offered a good job at a small but growing company. I don’t think this company can match my salary demands so I would like your advice on compensation — how to negotiate professionally with them. Thanks.

Nick’s Reply

compensation negotiateJob candidates can flub negotiations if they fail to recognize that there are two components to compensation. There’s money, and there’s everything else. If you ignore that dichotomy and focus primarily on the money, you miss the point of compensation and you might forego a job you really want. Of course, if salary is the key for you, then much of this advice won’t be helpful. But if you’re open to alternatives to salary alone, read on.

What is compensation?

Compensation is not necessarily just money. An employer compensates, or “counterbalances or makes amends for” actions you have taken (that is, work you have done) for the employer’s benefit. Viewed this way, compensation might have little or nothing to do with paying you money.

You might think I’m batty, but if you’re forced to negotiate with an employer who can’t meet your salary requirements, suddenly the idea of negotiating beyond money gets interesting. Let’s consider what compensation really means.

What is compensation for?

You devote time, effort, brain power, and perhaps muscle to do a job. These resources are all limited. You deplete them from your life as you deliver them to your employer.

For example, you take time away from your family so you can do the job. Who takes care of your kids? Who grows the potatoes for your dinner? Where do you find time to build a shack to shelter your family from the cold?

If you’re going to tend the job your employer needs done, who will take care of your needs? Simple: your employer. A company must compensate, or counterbalance, for what it takes away from your life — or you will not be available to do the job you’re hired for.

What kinds of compensation are there?

An employer could provide you with housing. (Coal mines used to build entire towns to house their workers. We won’t get into how this system was often abused.) Or, it could give you food. (Restaurants often feed their workers.) In recent times, companies have provided on-site day care for children, or have allowed employees to bring pets to work. If your mortgage, meals, and child care were covered, salary might not be the only salient component of your compensation. You might instead focus on negotiating for a house rather than a shack; for education in addition to child care; and for steak rather than potatoes for your kids.

Did you negotiate for any of those things the last time you entertained a job offer? Maybe you should have, especially when the employer couldn’t cough up the cash you wanted. (See How I negotiate compensation.)

Of course, the list of potential forms of compensation is virtually endless and depends on the company and on you. The challenge is to explore the best, most reasonable alternatives together.

Compensation: Negotiate beyond money

Now, some of these examples are admittedly extreme. But when a company is strapped for cash, should you hang your head and walk away? For better compensation, negotiate beyond money. The smart job hunter knows to shift the negotiation to non-cash, non-salary forms of compensation. You can suggest acceptable alternatives and help the company identify ways to “make amends for” its inability to compensate you in cash. To do this, you must be able to express your needs in terms that can get them satisfied.

Cash futures. If a company can’t match your salary requirements, but you still want the job, don’t fight it. Instead, put other compensation options on the table.

These might include “cash futures”: company stock, an early review with a guaranteed raise, an incentive plan based on agreed-upon performance criteria, guaranteed severance upon termination, elimination of a non-compete clause, or a retention bonus payable once you’ve been on the job for one year.

Salary alternatives. Then there are indirect benefits, on which a company gets a discount (think tax write-off, too), but which deliver value to the employee: computer equipment and other technology to use at home, extended paid vacation, a transportation reimbursement, an expense allowance, child care benefits, a paid cell phone, education benefits, and tax advice services or even payment of taxes (not uncommon for executives).

Priceless time. There’s also quality-of-life compensation: flex time, sabbatical leave, unpaid time off and, nowadays, the freedom to work from home. Most people crave more control over their schedules. You won’t get paid for those summer Fridays off, but if a company can’t afford a full week’s work anyway, you still have a job to go back to on Monday.

Money is great because it’s fungible. It’s an almost universal medium of exchange. It gives us the freedom to buy what we need. But when cash is tight, there’s also freedom in knowing how to negotiate beyond money to get compensated for our work in other ways. You must be able to discuss alternatives, because creative compensation terms might yield a job where there was none.

I’d never suggest taking a job that doesn’t pay well enough, unless maybe if you’re desperate. To be a really effective negotiator, you must be prepared to walk away from any deal that’s not good enough. But before you walk away from a good job with a good employer that “can’t afford you,” try to boost the compensation — negotiate beyond money.

Have you ever foregone higher salary for something else important to you? Have you successfully negotiated beyond money? What are the top three forms of compensation for you? What’s the most unusual form of compensation you’ve received for your work?

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Only 1 reason to sign Non-Compete Agreement

On February 7, 2023
Only 1 reason to sign Non-Compete Agreement

Question

There’s been a lot in the news about Non-Compete Agreements being outlawed. I got stuck with one when I took a job about 10 years ago. When I quit and got another job, they claimed I joined a competitor and threatened to sue me. (I didn’t consider it a competitor.) Things got nasty but they finally backed off after my lawyer sent them a nasty-gram. I’m interviewing again, and the matter of an NCA has come up again. Is there a way to escape these things until the law changes?

Nick’s Reply

non-competeMany years ago I worked for a time at a small, nimble, regional technology company. We were successful because our managers and employees were very smart, hardworking and highly competitive. There were no NCAs. Until a bigger, national company bought us out.

Soon, all managers received an e-mail and an NCA. We were instructed to sign and return it to HR. Every manager signed it. Except me. I ignored it completely. HR called me again and again to remind me. All they got was, “Okay, thanks for your call.” They finally gave up.

Sitting around shooting the breeze with other managers, it came out that I didn’t sign. They were all stunned: “You’re gonna get fired!”

“They won’t fire me. They want me to sign an NCA to stop me from joining a competitor and taking business with me. Since I have not signed, they’d be foolish to fire me because then I’d join a competitor and compete with them —and they won’t be able to do a thing to stop me because I never signed.”

Nobody fired me. And not long after, I joined a competitor.

You have the power right now to just say no, and I don’t think it’ll hurt your chances of getting hired.

What is a Non-Compete Agreement?

A Non-Compete Agreement is a contract that in essence interferes with a person’s right to work where they want and for whomever they want. Employers used to require NCAs primarily for new executive hires, but today even fast-food workers are sometimes required to sign them.

Except in one case, which we’ll discuss because it’s the only reason to sign an NCA, these agreements on one-sided, protecting only the interests of the employer. NCAs have been controversial for decades. A few states have outlawed them. While NCAs have proved difficult to enforce, few departing employees can afford the legal costs of fighting to protect their rights.

NCAs can’t hurt you if you don’t sign

Now, the Federal Trade Commission has proposed a rule that would forever ban NCAs in employment for an estimated 160 million working Americans. But it’s not law yet.

Whether the law is on their side or not, many employers will try their luck getting you to forfeit your right to work for a competitor — simply because it costs them nothing to try. And they know most job applicants are likely to give in and sign an NCA. They rely on the ages-old fear job hunters have of being rejected. Many job hunters quickly rationalize that “I can’t worry about this — I need the job” or “they’d never come after me.” In either case, intimidation works wonders.

Certainly, even if they have an NCA, some employers will not come after you if you go to work for a competitor. And some will fold their cards if you firmly but politely decline to sign an NCA. They will hire you anyway.

But employers that are serious about NCAs will throw their legal might at you and you probably can’t afford to fight that battle, whether you can win it or not. Few people are willing, or able, to spend money on lawyers.

So why risk it? If you don’t sign an NCA, they can’t sue you for violating it.

Negotiate

Of course, if you decline to sign, you might not get hired. Still, my advice is to decline, because you’ve got a lot in your favor, especially right now.

  • Unemployment is way down (which means it’s harder to fill jobs).
  • The number of new jobs being created is way up (which means it’s harder to fill jobs and job seekers are likely to have more options).
  • Employers are paying higher salaries because… it’s harder to find workers and to fill jobs.

You’re in a good negotiating position because an employer likely needs to hire you today more than it can afford to worry about losing you to a competitor tomorrow. So negotiate. (See also: Salary Negotiation: How much to ask for.)

There’s only one reason to sign an NCA

If you feel you really must comply and sign the thing, there are two ways to protect yourself. First, consult an employment attorney that works only for executives and employees. Spend the money to get help negotiating.

Second, consider what an NCA really does. It protects the financial interests of the employer. Not yours.

The only reason to sign a Non-Compete Agreement is if the company pays you to sign it.

Two can play at this game. If a job offer is made contingent on you signing an NCA, ask for a severance agreement. Consider this approach.

How to Say It
“I understand that you need to protect your company’s financial interests. And I need to protect mine. If you’re concerned that you’ll lose money if I compete with you, then we’ve established this NCA is worth money. Now the question is, how much? If you want to restrict my ability to make money so you can avoid competition, you need to compensate me. A one-year NCA that prohibits me from working for your competitors is worth at least my salary for a year, plus whatever raise I’m likely to get in today’s market. So I’ll sign if you give me a severance package to compensate for locking me out of the industry.”

By the way — employers routinely give this severance deal in conjunction with an NCA to executives they hire. If they’re going to apply this to managers and other employees, employers need to pay for that which is worth money — your NCA.

If they won’t?

How to Say It
The next time you’re faced with a job offer that requires an NCA, just say, ”No thanks, but I’ll take the job without it.” If they balk: “In that case I’ll take an offer elsewhere and be your competitor.”

If you’re good enough to hire, you’ll also be a formidable competitor.

Still nervous about refusing to sign an NCA? Please consider again the three truths I listed above about the job market today. I believe the job seeker has the distinct negotiating advantage. But as always, don’t just do it because I said to. Consider what I’ve said and use your best judgment to do what’s right for you.

Did you sign a Non-Compete Agreement as a condition of getting a job? Why? Has an employer ever come after you for violating an NCA? Do you believe job seekers today have the negotiating edge?

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4 answers about signing bonuses

On July 11, 2022
4 answers about signing bonuses

Question

When it rains, it pours! Two of my friends got new jobs and both were offered signing bonuses. Is this common now? I have a few questions about signing bonuses.

  1. What is a signing bonus?
  2. Is there a “gotcha” I need to know about?
  3. When is a signing bonus typically paid out?
  4. Is a signing bonus taxable? If yes, at what rate?

Thanks for your answers.

Nick’s Reply

signing bonusYes, I’m seeing more signing, or “starting,” bonuses nowadays. Let’s answer your questions in the order you asked them.

1. A signing bonus is a one-shot deal

In a competitive job market, companies do all they can to attract the right kinds of people. If a company really wants to hire you but fears a competitor might snatch you up first (or that you’ll stay with your current job), they’ll pony up a bonus to get you to sign on. Or, they may offer a one-time bonus to compensate for something you’ll be forced to leave behind at your old job — like an imminent raise or sales commission.

That’s what a signing bonus is: a one-time inducement (though it may be in multiple payments) to get you to take the job.

2. Some signing bonus gotchas

Any bonus is a good thing, as long as you understand the terms. Here are some gotchas that may surprise some people.

Be aware that the bonus probably won’t affect your salary, or a review and raise, or the basis for any life insurance coverage, or your 401(k) program. That is, if you accept a salary of $100,000 and a signing bonus of $20,000, and you’re given a 5% raise next year, your new salary will be $105,000 — not 5% X $120,000.

Any benefits you get that are based on salary will not be affected by that bonus, because it’s usually not considered salary.

Companies love that, because it’s a short-term, one-time expense to them. Don’t let anyone convince you that a $100K salary plus a signing bonus of $10K is the same as a $110,00K salary without a bonus. Long term, there can be big differences because there’s nothing long-term about a one-time bonus.

Here’s a particularly sneaky gotcha. An employer hired a hotshot sales person and made the signing bonus contingent on the new hire turning over their book of business to a more senior sales person in the company. It was a nasty surprise because the new hire didn’t read the agreement carefully.

3. A signing bonus may not be paid all at once

Signing bonuses can be paid out any way the company wants (and you agree). It’s likely to be paid out over time. That’s because your new employer wants you to stick around. After all, you could accept the job, pocket the entire bonus, and quit six months later.

They’re probably going to spread the payments out, or make you sign an agreement saying the bonus is recoverable if you leave the job in less than, say, a year.

In some cases, they won’t make any payment on the bonus until you’ve been on board for an agreed-upon period of time. Read the fine print, and negotiate.

4. Tax consequences

I don’t give tax or legal advice, so you should check with a CPA and perhaps a lawyer about your specific situation.

Generally, a signing bonus is typically taxable as income. It’s considered part of your total earnings, and whatever your income tax rate is, that’s what you’ll pay on the bonus. The only way around this expense is if the company factors it up to cover the tax on the payment — but you still pay the tax. (Factoring up makes an interesting negotiating gambit.)

At executive levels complex deals can be struck using financial tools and techniques we mortals are not likely to have access to.

Settle it before accepting an offer

You should get all your questions about a signing bonus — and all aspects of your compensation — answered before you accept a job offer. If what you’re told is not reflected in the written offer or agreement, insist that it be added.

The terms of signing bonuses vary from situation to situation. If an employer offers a signing bonus, settle all the details in advance.

Negotiate.

Finally, remember that a signing bonus is just as negotiable as any other part of an offer. In fact, if no signing bonus is suggested as part of your job offer, you can ask for it.

If the employer absolutely won’t budge on salary, and you won’t accept what’s offered, suggest that a one-time signing bonus could close the deal without breaking their salary rules and scales. Of course, keep in mind that this won’t have the effect of a higher basis for raises and other benefits — but it’s still more money for you.

Have you been enticed to take a job because they offered a signing (or “starting”) bonus? How was this bonus structured? Were you able to negotiate it? When is it smart to accept such a bonus, and when might it not be so smart?

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Should you discount your salary to get your foot in the door?

On February 8, 2021
Should you discount your salary to get your foot in the door?

Question

get your foot in the doorHow do you get your foot in the door without the necessary degree (yet)? I’m changing careers from computer programming to bioinformatics, which is a field that uses computers to answer biological questions. Most bioinformaticians I’ve spoken to consider computing to be a more important skill than genetics. While I’m almost finished with a masters in the field, I really need to get a job, but most jobs list a degree as a requirement.

I’m considering selling my lack of a completed degree as an opportunity for the employer to snag an experienced programmer who’s new to bioinformatics at a discount, if they hire me now vs. waiting until I finish my degree when I’ll be more marketable.

Is this a good idea? I know it will have an impact on my ability to negotiate a salary, but 2020 has left me in a position where I simply must have an income. So my concern is more about whether it will look bad, or presumptuous.

If you think it’s a good move, how should I phrase this “value proposition?” Thank you.

Nick’s Reply

I don’t think we have many bioinformaticians in our community, but your question is a good one for us because it would be relevant to anyone contemplating a significant change in careers. The words “degree required” often stop talented people dead in their tracks when it should just make them find a way around that obstacle.

Paying to get your foot in the door

While I like your “willingness to deal” to get hired, I’m not sure the savings would mean enough to an employer to affect their decision to hire you now one way or the other. In fact, making your discount offer to help you get in the door might complicate the calculus. Getting a discount could actually put an undue emphasis on the risk the manager feels they’re taking. Make sense?

“Degree required” is often negotiable if the candidate can show relevant experience or related education (or potent, relevant references). You could easily submit an application that notes “degree expected Month, 2021.”

Networking to get in the door

This is a case where I think my general advice to avoid applying with resumes and forms is all the more important. Resumes and forms cannot defend you or explain the valuable trade-off your computing skills represent. If you had a personal referral to the hiring manager, you could reduce the risk of being rejected out of hand for lack of the degree. A good word from a trusted contact could lead the manager to take a chance on you. I really think investing time and effort to identify and quickly develop such a contact could be invaluable.

My guess is you have some companies in mind. Start mapping out the network of people who might help you —  people connected to each company and others associated in turn. It’s a little-known fact that the nodes on the periphery of a network are often the most useful and productive (cf. Six Degrees: The Science of A Connected Age, Duncan Watts). This means the person that will ultimately help you is probably unknown to you today. Map out that network exhaustively. Start dropping notes to people you identify that might provide you with insights, advice and introductions. If networking like this makes you shudder, learn how even shy people can network.

The ideal referral or introduction would come from someone who connects the dots for the hiring manager about how your programming expertise would benefit the manager.

More tips about how to pull this off without feeling you have to beg:

Shared Experiences: The key to good networking

Natural Networking: An end to Stupid Networking

Network, but don’t be a jerk!

Earn A Network: Ask for the world’s smallest favor

Think like the manager

If I were the employer you approached, a lot would depend on the specific job I was trying to fill. If it’s standalone (vs. working on a team) or a senior role, I might really want at least a couple of years hands-on experience in bioinformatics specifically. But if all the weight of that specialization is not going to be on the new hire, I’d probably consider a sharp new grad who shows me they can ride a fast learning curve without falling off. I think you need to appeal to the latter kinds of managers.

To get your foot in the door without the degree it’s crucial for you to glean insights from people in bioinformatics who know and work for managers you may want to work for. So making such contacts is all the more important. They will hopefully influence a manager and also provide you with insights so you can choose managers and companies wisely. (These folks might also help you with your question about offering a salary discount.) You need that extra edge.

Get an edge to get that foot in the door

Gene Webb, my mentor at Stanford, was a biz school professor whose research was in decision theory. He taught all his students this: If you’re going to take a bet, any marginal bit of information you have that your competitors don’t have makes the bet worth taking. Employers are so reliant on keywords in resumes and job applications that any candidate’s odds of success are — in my opinion — about the same. They’re all tiny! The recruiting process reduces even the best candidates to even odds of being brought in for an interview. The marginal advantage, which is always worth cultivating, is a personal recommendation. It raises your odds of getting a meeting dramatically. (Here are some ways to get an edge.)

I wouldn’t sell myself short by offering a pre-emptive discount to get your foot in the door. Even if you’re going to make the offer, it should be via personal conversation or via a referral the manager trusts. There’s just too much chance such an offer on a document (that can’t defend itself) will be read the wrong way. I would not do it. That said, if your interview goes swimmingly but the manager seems hesitant about that degree, well, then you might play the discount card. Now you’d be doing it the right way – face to face, and you’d be able to answer any questions the manager has about your offer. However, how you play it would depend on any new information you gather in that interview.

Would you offer a salary discount to get a job — regardless of your line of work — when you don’t meet all the requirements? If you’re a manager, how would you regard an applicant that offers to accept a lower salary in exchange for a shot at the job? What other clever methods can this reader use to get a shot?

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Do we need a $15 minimum wage?

On January 25, 2021
Do we need a $15 minimum wage?

Question

$15 minimum wageMost of your readership seems to be in relatively high-salary jobs but I have a question about lower-level jobs. I hope you think it’s worth covering. I see the federal minimum wage is in the news again because the new administration is trying to push through an increase. You published a Q&A column almost exactly a year ago arguing for a national $15 minimum wage (Who really needs a $15 minimum wage?). People expressed very strong opinions. A lot has happened in the past year — COVID, the booming stock market, the change in administration, unemployment. Do you think attitudes about raising the minimum wage have changed? Has yours?

Nick’s Reply

I don’t like to veer away from the main purpose of Ask The Headhunter, which is to provide advice people can use to improve their job situation. But now and then an issue comes up that’s important for us to discuss and understand. The minimum wage is important to everyone because, no matter how much most readers here earn, we all encounter workers who do the lower-paying jobs that affect our lives every day. In fact, we rely on them.

I support a $15 minimum wage

In the January 15, 2019 column you mentioned, I advocated for a national $15/hour minimum wage. My view has not changed. I wrote:

“Fair-market compensation is an amount people need for shelter, food, transportation and other basics of life. That’s more than $70 a day where most people live… If your business can’t generate enough cash to pay a living wage, your business is going to fail for lack of workers. Shut it down now and get it over with.”

Some readers insisted that not all areas of the country should have their minimum wage set as high as $15, because housing costs are much lower in some places. But in an addendum to that column I showed why that line of reasoning is a straw man.

What happens if wages are legislated up?

Many business people have tried to make the case that they would bear the costs of mandatory higher wages, with the result that they would have to lay off workers. Or, they’d have to raise prices, which means they’d lose customers and potentially go out of business altogether. Any way we slice it, these businesses claim, the outcome would be fewer jobs.

As a dyed-in-the-wool capitalist I see this as a kind of creative destruction. When businesses shut down due to economic pressures, that’s not necessarily bad for the economy. It creates opportunities for better-run companies to replace them. As the tectonics of competition shift, workers move to new employers that create new and better job opportunities.

I’m not an economist, and I don’t run a restaurant that depends on $7.85 wages and wait staff that’s paid mostly with tips. I don’t pretend I can predict what a national $15 minimum wage will really mean. But I have opinions that I think are grounded in common business sense.

Nonetheless, my opinions don’t matter in the bigger picture. You, dear readers, are the bigger picture, so I want to discuss what you think. That’s the purpose of this week’s column.

The backdrop on the minimum wage

Let’s set the stage with a report from NBC News about what the nation seems to think about raising the minimum wage:

“Despite the bitter political polarization in the United States today, public opinion polls of voters in red and blue states both show strong support for a higher minimum wage. An August survey found that 72 percent of Americans — including 62 percent of Republicans and 87 percent of Democrats — said the minimum wage should be high enough to keep full-time workers above the poverty line.”

But the same survey emphasizes that higher wages will cost a lot of people their jobs:

“The nonpartisan Congressional Budget Office determined in a 2019 report that raising the hourly minimum wage incrementally to $15 by 2025 could shave, at the median, 1.3 million jobs from the labor force, but would also lift 1.3 million people out of poverty and contribute an additional $8 billion to the aggregate household income of these families.”

One final statistic: While unemployment has held steady, job growth has stalled. Even without a higher minimum wage, in December employers cut 140,000 jobs.

What do you think about a $15 minimum wage?

So, what do you think? Regardless of how much you make today, or whether you are employed or not, do you support a national minimum $15/hour wage? Either way, what do you think the impact would be?

If you were making wage policy, what would you do?

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You got the job promotion! Where’s the raise?

On January 18, 2021
You got the job promotion! Where’s the raise?

Question

promotionMy friend got a job promotion but they haven’t told her what the new base salary is going to be. She was hoping for at least a $5,000 raise. She knows for a fact that the budget is for double that. I told her she should have asked her manager about the raise immediately when he gave her the promotion. They already low-balled her when they originally hired her. I think she needs to suggest a $10,000 increase and see what they come back with. What should she do?

Nick’s Reply

I agree with you that she made a mistake not asking about money immediately. In her hesitation, she unwittingly signaled her boss that money isn’t an issue, and perhaps that she’s not confident in her negotiating ability. The boss may have judged he can take advantage of her. Your friend needs to go knock on her boss’s door.

Is a job promotion reward enough?

Some employers play an underhanded game with salary and compensation. They believe the longer they avoid bringing up money and the longer you don’t raise the issue, the less they need to pay you. This happens with job-offer negotiations and with promotions and raises.

In the case of a promotion, by not mentioning money your employer may signal that the promotion itself is your reward, and that you should be thrilled at the news and accept with no questions asked.

The discomfort your friend felt — and the reason she didn’t ask about the new pay — stems from an insidious contrivance employers (especially HR) rely on when discussing a job: It’s not nice for job candidates to bring up money.

Should you bring up money?

Our employment system drills that cockamamie “rule” into our psyches. This ridiculous idea dominates most job-interview advice. “Don’t bring up money! They’ll think you care more about pay than about the opportunity, the job, and the company!”

And then there’s the capper: “It’s unprofessional!”

Believing this balderdash is probably why your friend is not being paid what she’s worth — and why she’s so hesitant to speak up.

Be forthright about money

Of course money is a key issue! It’s why employers discourage discussing it! Your friend should do as you suggested. Go ask her boss immediately how much the raise is. Since she seems to feel awkward, I suggest this casual yet forthright approach.

How to Say It
“Thanks for offering me this job promotion! So, what’s the money (or pay) like for this new role?”

Say it with enthusiasm and a smile. It’s direct, non-confrontational, friendly and almost innocent. Most important, it signals your clear expectation that the pay must be higher. This is actually the disarming start of a negotiation.

Why do employers always make the salary clear in a job offer, but not always with a promotion? With a promotion they clearly have leverage because you’re already employed at the company. They believe your only option if you reject low pay for a promotion is to quit and start a job search. They believe you have no leverage. This is why you must always have other job opportunities simmering on a back burner. No job is guaranteed. It’s imprudent to have to start a job search from scratch if your current job ceases to be viable.
What if the boss states a low number or says there is no raise at all?

Turn a job promotion into a raise

Your friend should politely and respectfully make it clear the matter is not settled and she expects a negotiation before she accepts the promotion.

How to Say It
“My expectation, based on what the job requires, is that the pay is higher than that. Can we discuss it?”

If the boss asks how much your friend is talking about, she should not state a number just yet because, if the boss is not agreeable, that will likely end the conversation. The objective here is to have a dialogue.

This is where your friend must shift the boss’s expectations, take the discussion up two notches, and take control of the negotiation. Here’s what to say to turn a promotion into a raise.

How to Say It
“I don’t expect you to pay me more than I’m worth. I’d like to work up a brief business plan estimating how much added value I can bring to the job, beyond what the company expects. If I can’t convince you, then you shouldn’t pay me more. Can we meet in three days to go over it before you set a salary on the job?”

The biggest mistake people make in salary negotiations — mainly because it’s an emotional subject and they’re usually not prepared — is to blurt out a salary they believe they’re “worth.” But they fail to justify the number. They don’t make the case, except to say, “It’s what I think.” That’s not sufficient.

Make the business case

What if you negotiate a higher salary but your boss doesn’t deliver the promised raise? Consider the nuclear option.
An old boss of mine handled requests for raises quite effectively. If you asked for more money, he’d smile expectantly. “What more are you going to do?” It’s a fair question. I’d never talk money unless I had a good, defensible answer. Think of it as a simple business plan.

This approach should help your friend start a thoughtful conversation with her boss; a discussion, a friendly back and forth about the job, her skills, and specific ways she can bring more value to the job. Talking shop is always better than just haggling for money. It reveals true respect for the job and the employer.

To be truly effective at negotiating a promotion and a raise, your friend must be willing to make her case. This means preparing a brief business plan that justifies what she’s asking for. And, as in a job-offer negotiation, if what she really wants is truly important to her, she must be ready to walk away from the promotion if the pay isn’t to her satisfaction.

Have you ever been offered a job promotion (and more work) without an appropriate raise? How did you handle it? Did you ever decline a job promotion because it included no raise? Is such a deal ever justified?

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Am I underpaid?

On August 24, 2020
Am I underpaid?

A reader may be underpaid but doesn’t really know. Let’s explore how to find out in the August 25, 2020 Ask The Headhunter Newsletter.

Question

underpaidI want to change jobs because I suspect I’m underpaid. I’ve been looking at Glassdoor and other salary surveys. Are they accurate? How can I find out what salary I should expect from a new job, so that I can figure out if I am currently underpaid, as I contend, or if I should stop my whining?

Nick’s Reply

We live and work in a quasi-capitalist environment. For the most part, the market determines value. So put yourself on the block and see what kinds of bids you get. Seriously.

Do surveys say you’re underpaid?

Salary surveys are usually either out of date, or they are naturally biased toward the mean. That is, they survey people who want to be surveyed and they emphasize the value of the average worker. They’re not good at explaining why people on the leading edge of the curve are paid what they are paid. (See Glassdoor Salary Data: Worse than useless.)

Trying to look up a job title that fits you in a salary survey is like trying to find a job ad that matches you exactly. You’re not likely to learn much about your individual worth from either.

Surveys don’t predict individual value

You don’t say what work you do or what industry you’re in, but you seem to suggest salaries in your field are increasing while yours is not. Does it matter? Does it mean you will get a bigger raise or a bump in salary to change jobs? Asking me what you’re worth is as good as consulting the salary oracles — not very! While a survey may be useful in understanding trends, it does not predict salary for any individual. That means you.

Short of putting yourself on the block, I think the next best way to get an idea of your value in the market is to talk to real, live people in your field.

Ask your peers

Get the information you seek straight from the horse’s mouth. Meet these people through professional associations, at industry meetings, through industry publications and at training courses outside your company — and, of course, in relevant online professional communities. In other words, discuss compensation issues directly with people who are not under your company’s control so you can form a better picture of what your compensation could look like.

(I am not suggesting blasting messages to 50 people with your job title on LinkedIn and asking how much they earn. I prefer venues where you’ll have to earn your reputation and credentials before you’ll get any really useful information.)

Of course, some people won’t discuss their own salaries, but I find in general that people will talk about compensation in their field and share what they know about it. You’re far better off talking with others who do the kind of work you do simply because such dialogue is far richer than reviewing cold numbers from a survey.

If you’re not participating in your professional community this way, you’re making a big mistake. These are the folks who can help you figure out the value question, and perhaps help you find your next job. Don’t whine. Go mix it up with your peers!

This is a good exercise for all of us. We can’t ask questions of a data point on a salary survey. But we can ask one another.

How does anyone figure out what they’re worth? How do you figure it out? Does it change the way you handle your career? What advice would you give this reader about whether they’re underpaid?

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Should I accept a job offer with a salary cut?

On February 24, 2020
Should I accept a job offer with a salary cut?

In the February 25, 2020 Ask The Headhunter Newsletter a reader asks whether it’s possible to recover after accepting a job offer with a salary cut.

Question

salary cutI’ve been unemployed for six weeks. Was earning around $120K. Have been offered a position at $85K and, quite frankly, I need the money. Even more important, I recognize that my self-esteem is too bound up in my career: I need to work for more than just the money. Am seriously considering accepting this lower offer, because I believe these folks cannot afford to pay more. Will my chances of negotiating another position at a higher salary be irrevocably damaged if I accept a salary cut? Advice, please, and thanks in advance.

Nick’s Reply

You’re facing an important decision, and you need to be sure you are balancing the key issues. How long can you afford to go without a job? If you accept this offer, how much time will you be able to devote to continuing your search for one that pays better? Will being under-employed versus unemployed affect your self-esteem?

(And consider this: Is it possible to get more money out of a company that “cannot afford to pay more?” We’ll get to that at the end.)

What’s your objective?

I could easily tell you not to give in yet, and that it would be smarter to continue your search until you find a job where the pay is more in line with what you’re accustomed to. Six weeks is not a long time to find the right job. But being able to pay the bills is just as big a consideration. You could borrow to meet expenses until you find something better — but how would that affect your motivation and effectiveness in interviews?

These are very personal questions that only you can answer, and I think they are more relevant at this point than the main question you’ve asked: Will a salary cut damage your ability to win a higher salary later? While it might seem penny-wise and pound foolish to focus on the short-term problem (paying the bills), there’s something to be said for surviving today so you can stay in the game.

It’s important to think about what your objective really is.

Why a salary cut?

In today’s business climate, radical corporate restructurings and the outsourcing of jobs to “consulting firms” seem to be killing wages and salaries. While economists consider it a minor footnote and blow it off, stagnant wage growth tells us something is very wrong. Seemingly low unemployment suggests pay should be going up — but it’s not. This is for another discussion, but it seems the U.S. Department of Labor may be misrepresenting the impacts of masses of uncounted people who are returning to the labor market. I could make the argument that there is no talent or labor shortage; that in fact, we’re in an unprecedented talent glut. That’s why employers think they can hire you even with a salary cut.

There are a lot of good people on the street. Some employers are capitalizing on this by hiring great workers cheap. But this is no more of an ethical problem than you accepting a low-paying job while continuing your job search — and then quitting for a job with more pay.

(Is it ever worth taking a salary cut, other than because you need the money? I see one possible benefit, if you look at it as a re-tooling investment. A lower-paying job might be the price you pay for an opportunity to gain a foothold in a new field or business, and to learn new skills.)

Are good salaries dead?

While some employers are buying talent at a discount, others are smarter. They don’t assume that because you took a pay cut at your last job, you’re now worth less. They see an opportunity to land a great new employee who might not have been available to them otherwise at any price. (See Dr. Dawn Graham’s insightful article: The Salary Negotiation Mistake That’s Costing You.)

I know one very rare HR manager whose policy is to offer candidates what they’re really worth. If they are truly under-paid, she helps get their compensation back on track, and earns the new hire’s loyalty. Good salaries are not dead. (See Why employers should make higher job offers.)

So, no, I don’t think your chances for more money will be irrevocably damaged — not unless you become complacent. You must continue your job search if you take this lower-paying job. If you stay in the $85K job too long, you could indeed hurt yourself long-term.

Encourage better job offers

As you continue to search while newly employed, you must learn how to negotiate from a position of strength — even if the employer says it “cannot afford to pay more.”

  • Never disclose what your current salary is. It’s none of their business. An employer will always use your current salary to negotiate against you. See We need to know your salary because —.
  • Ask the employer what the salary range is before you agree to interview. Don’t fall into the trap of interviewing for jobs that won’t pay enough. You’re likely to rationalize accepting another low salary simply because you invested so much time in it.
  • Assess the value you could add to any new job you’re considering. Can you do it faster, more efficiently, more profitably than the employer expects? Couch your salary expectations in terms of what you will bring to the employer’s bottom line. Be ready to explain it.
  • Choose higher-paying jobs and, for each one, prepare a mini business plan that demonstrates clearly why you’re worth the money.

What counts most in any job negotiation is what positive impact you’re offering to an employer’s bottom line. That’s what wins you more money. Focus on conveying that critical message to an employer, and you’ll always be able to negotiate for more money — with a current employer, or with a new one.

Have you accepted a job with a salary cut? Why? Were you able to regain your higher salary level? How? What should this reader do? Do you believe salary cuts are more likely in today’s job market?

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Should I extort a salary raise out of my boss?

On August 5, 2019
Should I extort a salary raise out of my boss?

In the August 6, 2019 Ask The Headhunter Newsletter a reader wants to use a job offer to get a raise.

Question

A competitor offered me a job with a higher salary. What is the best way to use this to ask my boss for a raise, and what could be the best speech to convince him?

Nick’s Reply

salaryUsing a new job offer to leverage a counter-offer — a raise in salary — from your current employer is almost always a costly mistake. In fact, it’s a kind of extortion, so let’s call it that, and let’s consider some of the risks you could face.

You’re marked

Even if this gambit works, you will likely be marked as disloyal and untrustworthy. The next time cuts have to be made, you’ll be on the list because you already threatened to quit over money. Management will be concerned you’ll be likely to pull this again the next time you get a better offer. (No matter how much your boss likes you, business exigencies usually trump friendships.)

Instant termination?

If you’re using this new offer to leverage more money from your current boss, be ready to start that new job ASAP, because you may be walked to the exit immediately. Some bosses don’t take kindly to threats, no matter how diplomatically you make them.

Paying for your own raise

If you succeed in getting a raise by holding your boss over a barrel, where do you think that extra money will come from? It will likely be an advance against a future raise or promotion. You usually can’t win at this game because the bean counters are counting dollars. Most likely, you will wind up paying that raise to yourself in some way.

They want you, so be happy

But there’s good news here, too. You’ve found a new job where they want you! If you’re motivated to take a new job in a new place because you’re unhappy now, getting a few more bucks to stay (assuming you can get it) isn’t going to change the fundamental problem of job dissatisfaction. If that new job is really great for you, just take it.

Go where they’re making you happy!

If what you really want is a raise, ask your boss for it before you go interview somewhere else. Please see Should I ask for a raise one more time?

The “best speech” to give your boss is one sentence, and it should be in writing. You’ll find it here: Quit, Fired, Downsized: Leave on your own terms.

Do you want a raise, or a better job?

The bottom line is this. You need to make a choice, so compare your two options: Do you want a raise from your boss, or do you want a new job with a raise?

  • Your current employer apparently doesn’t recognize your value, or it would have offered you a raise and/or a promotion.
  • The new employer is putting its money where its mouth is — without any prodding. That’s worth a lot by itself. If it’s a good job, that’s who I’d want to work for.

I’ve seen people leverage higher salary out of their current employers when they get a bigger offer elsewhere — and it works out in the long run. But it’s very rare. Such a negotiation and accommodation requires great integrity on the part of the employer and the employee.

Work where it’s better

My advice: If the work, the job, the new employer and the money are all better, just resign and move on. Don’t look back at an employer who wasn’t willing to do right by you without a threat. Don’t forgo your future.

Have you ever tried to use a new job offer to get a raise from your current employer? What happened? Is there a way to extort a raise and mitigate the risks I’ve listed? Am I over the top when I refer to this gambit for getting a raise as extortion?

Don’t miss this new feature!
News I want you to use highlights articles that can give you an edge in unexpected ways!

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Dirty little (HUGE) salary secrets revealed

On August 5, 2019
Dirty little (HUGE) salary secrets revealed
  • How do you decide whether an employer is going to give you a fair — or better than average — salary shake in the coming years, if you accept a job there?
  • How do you judge whether that employer is still going to be in business a few years down the road, before you accept its job offer?
  • Should you take that job?

News I want you to use

salaryHere’s an inside look at how investors judge companies on how they pay their people — in particular, their CEOs and, for our purposes, how CEO pay compares to the median pay of all a company’s employees.

The 100 Most Overpaid CEOs:
Are fund managers asleep at the wheel?

In March 2019  As You Sow, a shareholder advocacy group, revealed some dirty little (HUGE) salary secrets that job candidates can use.

As You Sow monitors, among other things, CEO pay and evaluates its impact on investors. It turns out big institutional investors really do give a rat’s patootie about how much CEOs are paid — because it seems to correlate with a company’s performance and success.

Thanks to the 2010 Dodd-Frank financial reform bill, shareholders gained access to new information this year. Companies must now disclose the ratio of pay between the CEO and the company’s median employee, shining a brighter light on how high CEO pay has become. This new information can also be used in other ways.

Yep! It’s news we can use!

What this means to you

Digest as much of this report as you can, and let’s discuss what it means to you as you pick your next employer.

Will a company give you a fair salary shake? Skip to the appendices in the report (pp. 19-25).

  • Pick a company.
  • Take a look at how much it pays its CEO.
  • Then look at the median pay of all its employees.
  • Before you accept a job offer, follow the money!

Some good bits

As You Sow reports that:

The companies with overpaid CEOs we identified in our first report have markedly underperformed the S&P 500. Two years ago, we analyzed how these firms’ stock price performed since we originally identified their CEOs as overpaid. We found then that the 10 companies we identified as having the most overpaid CEOs, in aggregate, underperformed the S&P 500 index by an incredible 10.5 percentage points and actually destroyed shareholder value, with a negative 5.7 percent financial return… Last year, these 10 firms again, in aggregate, dramatically underperformed the S&P 500 index, this time by an embarrassing 15.6 percentage points.

Sheesh! Gotta wonder how the HR departments at these companies explain to job candidates how CEO pay reflects company performance. Do the candidates know to ask?

When shareholders were evaluating compensation packages in spring 2018, they had a new piece of information: the ratio of the pay of the CEO to the pay of the corporation’s median worker… The average of these CEO pay to median worker pay ratios as of Sep. 5, 2018 was approximately 273:1.

Betcha didn’t know the CEO of CSX Corp. makes over $150 million — 1,531 times more than the median employee. The ratio of Oracle Corp.’s CEO compensation to the median at the company is 907:1. Comcast’s CEO gets 458 times more than the company’s median employee salary.

Remember: The benchmark average ratio is 273:1.

Sheesh! Gotta wonder how the HR departments at these companies explain such dirty little (HUGE) salary secrets to incoming job candidates. Do the candidates know to ask?

Shareholders freak out

As Bloomberg columnist Nir Kaissar noted in a recent editorial, “As the grim pay disclosures pile up year after year, the backlash against the corporate elite will intensify. If corporate boards can’t find a better balance in their pay structure, outside forces will, and at a potentially far greater cost to companies and their shareholders.”

Opposition to high CEO pay has risen, and more companies have seen their CEO pay packages receive less and less support from their shareholders.

And we’re talking big shareholders:

California Public Employees’ Retirement System (CalPERS)… voted against 45.4 percent of pay packages of the S&P 500 companies; it voted against 73 percent of the 100 most overpaid CEO pay packages.

New York State Common Retirement Fund… voted against 26 percent of pay packages of the S&P 500; it voted against 53 percent of the 100 most overpaid CEO pay packages.

But what about the rank and file?

Resources

Big institutional investors are not voting against big pay packages for top executives — but they are voting against huge pay disparities that seem to reveal underlying problems.

Are employees at these companies freaking out? If you’re applying for a job at a company with a huge CEO-to-median-pay ratio — well, would you apply for a job in such a company?

What do you think it would mean for your compensation over time?

Should you take that job?

How to use it

When HR asks if you have any questions, try this one, courtesy of the good folks at As You Sow: What’s the ratio of your CEO’s pay to the median employee salary here?

How else can we use this news?

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