The most significant impact a person can have on their long term career earnings is to engage in salary negotiating early in their career. This will have a direct impact on the amount of earning potential they have in their future.
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 not only applies to your first salary and subsequent incremental raises but also to salary market differentials when you changes roles within a company. You may move into a job requiring significantly more responsibility or effort, but the salary you had beforehand can influence the starting salary of the new job.
As an example, imagine a person starting a new job as a QA analyst in a high tech company somewhere in America. Suppose 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 raise. Suppose it is a 10% raise which would be HUGE at many employers. The employee would gain an additional $4500 per annum based on 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.
Now imagine a 10% raise after the first year and consider the impact as the person advances through their career. The person with a higher salary in the beginning will always be ahead of the person with the lower starting salary, all things being equal (e.g. same title, same job performance). The person with the better salary negotiating will be moving ahead faster than the person starting with the lower salary. This impact amplifies with each subsequent year considering the same percent 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.
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.
It must also consider factors such as market, company guidelines, and professional performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for an increase. Some people truly value time and quality of life, while others are willing to venture out and accept stock options in lieu of extra salary.
However, when it comes to salary negotiation, don't be afraid to consider asking for more salary. - 20767
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 not only applies to your first salary and subsequent incremental raises but also to salary market differentials when you changes roles within a company. You may move into a job requiring significantly more responsibility or effort, but the salary you had beforehand can influence the starting salary of the new job.
As an example, imagine a person starting a new job as a QA analyst in a high tech company somewhere in America. Suppose 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 raise. Suppose it is a 10% raise which would be HUGE at many employers. The employee would gain an additional $4500 per annum based on 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.
Now imagine a 10% raise after the first year and consider the impact as the person advances through their career. The person with a higher salary in the beginning will always be ahead of the person with the lower starting salary, all things being equal (e.g. same title, same job performance). The person with the better salary negotiating will be moving ahead faster than the person starting with the lower salary. This impact amplifies with each subsequent year considering the same percent 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.
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.
It must also consider factors such as market, company guidelines, and professional performance. However when done well, it can really pay off. Remember to consider the value of all factors of compensation when asking for an increase. Some people truly value time and quality of life, while others are willing to venture out and accept stock options in lieu of extra salary.
However, when it comes to salary negotiation, don't be afraid to consider asking for more salary. - 20767
About the Author:
Trevor Davide Grant is a project manager in the IT field and has significant experience at salary negotiations. Trevor has worked for global telecom, power generation, software development consulting, and a prominent web 2.0 website. He has learned how to negotiate a salary in the most effective way. Learn incredible strategies on the topic of salary negotiating at www.HowToNegotiateASalary.com
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