How to negotiate my salary on a probable job offer?

March 14, 2010 7:47 AM

Please help me understand how to negotiate my salary on a probable job offer.

I'm currently facing my fourth interview for a senior position in a large company - the first three have been by phone, and now it's time to talk face to face. As a lead-in to that, they've e-mailed me to request some information, such as when I could start, if I have any other offers pending, and my salary information. They'd like to know my "current and expected salary, including base, bonus, and equity."

I have very little experience negotiating salary; I've mostly worked as a contractor and consultant for a dozen years or more, and generally there hasn't been much negotiation involved. I have the skills, experience, and ability for the position. I've done a little research about the going salary range for similar positions elsewhere. I think I should ask for substantially more than I'm currently making, because the job is considerably more complex and carries more responsibility than what I'm doing right now. However, I also want the job. Aside from the fact that it's a better job at a company I like more than where I am now, I know I'm going to be laid off in April (through nothing having to do with my performance), and I can't afford a long unemployment right now. Another consideration is that I'm well into my career at this point, and it's high time for me to think about preparing to retire in a couple more decades, so I want to make sure I get a fair compensation that will help me with that.

My main question, really, has to do with the "base, bonus, and equity" statement. I've negotiated base salary before, but I haven't really had to think about those other parts of a compensation package. What do they mean? How do I know what a good offer is? What should I ask for? And, of course, how can I make sure I get a good deal?

posted by anonymous to work & money (7 answers total)

This actually has the potential to be kind of fun.

Sit down with your CV and 1099s from the years you were a consultant/contractor. Create an average daily rate based on how long you were in each position (i.e. 10 days at 780 a day is 7800, plus 12 days at 600 a day is 7200, plus 90 days at 700 a day is 63000, weighted average daily rate of 696.430). Multiply that average by 260, and then subtract 20% ( it's standard practice to inflate consultant daily rates by 20% to make up for lack of benefits, etc.),

Average that (weighted, if it makes sense) with your current annual base salary. There's your magic base rate. Add 5-10% to that for your starting offer.

Base your bonus on what you've gotten in the past, or propose making it higher and tying it to a performance goal.

I have no advice on equity as my company automatically vests everyone into the ESOP after a certain (long) time period.
posted by charmcityblues at 8:04 AM on March 14, 2010

I recommend shelling out the $30 or $40 (or whatever it is) to download Jack Chapman's book on how to negotiate your salary. (Or find a copy at your local bookstore.) Great stuff.
posted by jdroth at 8:33 AM on March 14, 2010 [1 favorite]

it's standard practice to inflate consultant daily rates by 20% to make up for lack of benefits, etc.

Depending on the industry "standard practice" could be as much as three times (3x) a hourly rate for a large company employee. Some things to consider:

Consultant pays:
- All SS taxes
- Health Insurance
- Overhead
- Equipment
- Downtime (i.e. time between contracts)
- Vacation
- Retirement fund

Employee benefits can include:
- Health care
- 2 weeks or more of vacation and assorted holidays (usually 6 paid)
- Half of SS taxes
- Matching 401k funds (usually up to some percent, like 1% to 4%)
- Bonus/Profit sharing
- Some companies cover continuing education, tuition grants for children, day care, etc.

I'm sure I've left lots out, but you can see that an independent contractor/consultant can end up covering a huge gap in wages as your "salary" isn't all of what you get at a company.

To negotiate a salary, you need to understand the range the position offers (they'll tell you this because at almost all large companies, this is a set band for any level/role. Your job is to convince them that you deserve the top end of that band. The other side of that coin, is many companies limit your pay raise to no more than the salary band you are in, and thus you need to be promoted to make more than that (outside of bonus/profit sharing).

So, to answer your question about the "base, bonus, and equity" statement, you need to come up with the total compensation that makes sense for where you've been and how much you've actually been paying yourself. Also note that if you take on some salary risk, many companies are willing to pay you more on your successes through bonus. If it is a sales role, you could benefit greatly by having a robust bonus and low salary. If it is a role where you'll have little influence on the yearly profit of the whole company/your division, you will be better served by having a salary and no/modest bonus.

If they really are letting you create your package, then you have lots of flexibility in developing something that suits your needs. It sounds like what they are really doing is asking you to offer up what other companies have offered you and they'll meet that. Don't fall into that trap. Tell them you are looking at a competitive package from them and have them make the first offer. That's the point you start to "negotiate". Just my $0.02.
posted by qwip at 9:13 AM on March 14, 2010

They'd like to know my "current and expected salary, including base, bonus, and equity."

I have very little experience negotiating salary;

Have they actually made a firm offer for the job yet? Unless and until I had reached the point where the company in question has decided that they wanted you I wouldn't even begin to talk about salary expectations.

If you haven't had a single face to face interview yet then it's too early to start talking about salary. Any information you give them at this point strengthens their negotiating position at your expense. Worst case they decide that on the basis of your current salary you can't possibly be experienced enough to take on the role in question!

Put them off: say you'll be happy to discuss salary & the rest of the package when the company is ready to make you a formal offer. Until then it's too early.

It sounds like what they are really doing is asking you to offer up what other companies have offered you and they'll meet that. Don't fall into that trap.

Absolutely. Their HR is trained to get the maximum information out of you so that they can work out what your minimum price is and offer that (assuming that they want you at that price). Your job is to find out what their maximum price at which they still think it's worth employing you is, and get them to offer that!
posted by pharm at 10:27 AM on March 14, 2010 [1 favorite]

Your current situation and salary is really none of their business, and telling them this would be tipping negotiations heavily in their favour. Don't fall into that trap. They are trying to put you on the defensive, or they are worried about losing you to someone else. Either way, giving out this information does not benefit you. Even if you have a better offer out there, keep it to yourself. YOU know you have it, there is no reason to tell them - it won't affect how much they are willing to pay.

Figure out two numbers.

1) The package you will settle for, the bottom line. The one you will accept without regret. Keep this to yourself.
2) The package you will be extremely happy to get. Don't hold back - this is a negotiation. This is what you ask for, confidently, and in writing.
posted by TravellingDen at 10:27 AM on March 14, 2010

Professional recruiter talking here ...

Your current situation and salary is really none of their business, and telling them this would be tipping negotiations heavily in their favour.

This is not necessarily the case. Consider this:

1. A flat-out refusal to provide current compensation information is seen by many HR personnel as a red flag. If you're uncooperative on such a simple matter as this, where else will you prove to be a pain in the ass?

2. Your new employer might actually like you enough that they want to make you an offer that you will find very attractive. How will they know that if they don't know what you're making now?

In my experience, when employers ask about compensation expectations, they're not necessarily asking exactly what it's going to take to get you (though they'd dearly love to know). They really just want to know if they're "in the ballpark". Providing current comp information ("name, rank, serial number" sort of thing) can give them that confidence.

FWIW - I decline to work with candidates who will not discuss current comp.
posted by John Borrowman at 8:53 AM on March 15, 2010

A flat-out refusal to provide current compensation information is seen by many HR personnel as a red flag. If you're uncooperative on such a simple matter as this, where else will you prove to be a pain in the ass?

That's why you say you'll discuss compensation at the appropriate time. Before you've had a single face to face interview is not the appropriate time (all other things being equal).

They really just want to know if they're "in the ballpark".

There's nothing to stop a candidate answering that question without revealing the precise details of their current salary. If prefer to play hardball & refuse to interview without knowing these details up front, then that's your choice.
posted by pharm at 2:29 AM on March 16, 2010