Know What You’re Worth, Then Ask For It!
Is your salary paying you what you’re worth? Do you know the value of your skills, talents, and experiences in the marketplace, specific to your industry and location? This can be a hard question to answer but is the difference between working happily, being confident you’re being paid equitably, and feeling frustrated with your pay – potentially missing out on money that your peers are making.
In this post, we’ll explore how you can determine your worth in the market to go armed into your next pay negotiation, then share strategies you can use to put this knowledge into action. Use this when negotiating a raise for yourself or to get the maximum salary out of the job you’re interviewing for. Download the associated Triangulate Your Market Value Worksheet to follow along and calculate your market rate for your current or future job – you might be surprised by what you find and may want to have that negotiation conversation sooner rather than later.
Not currently in negotiations? Tuck the worksheet away and when you're ready to evaluate pay for your next job offer, pull it out to make sure you're negotiating a competitive rate for yourself. Don’t wait until you have an offer on the table and leave yourself scrambling for what you should be paid. That increases your likelihood of accepting the first pay offer when the goal is to engage in pay negotiations!
Elements of Pay
Before researching your future salary, there are a few key terms you’ll want to be familiar with that add up to your Total Compensation Package:
Knowing your value before walking into the interview means you’re ready to provide a preferred rate of pay immediately!
Base Salary: The fixed amount of money that an employee receives on a regular basis for their work, typically expressed as an annual or hourly rate.
Short-Term Incentives and Bonuses: One-time or periodic payments given to employees based on their performance, achievement of specific personal and/or company goals. One thing to note about bonuses is that they are not guaranteed. You may have a bonus as part of your compensation package, but if the company deems it hasn’t operated according to plan, you might not see this money in the full amount you were promised, or even at all.
Long-Term Incentives: Rewards provided over a longer time frame to motivate and retain employees. Examples include stock options, stock grants, Restricted Stock Units (RSUs), or other forms of equity-based compensation.
Commissions: Commonly found in sales or performance-based roles, commissions are a percentage or flat fee paid to employees based on the value of sales or business they generate. Commissions generally sit on top of a lower Base Salary. A common commission structure is 60% base, 40% commission, though they can be very personalized and differ from employee to employee.
Benefits: Non-wage compensation provided to employees, such as health insurance, retirement plans (e.g., 401(k)), life insurance, disability insurance, paid time off (vacation, sick leave), and other employee perks.
Other Rewards: Performance-based incentives, allowances, perks, work-life balance programs, and career development opportunities.
Total Compensation Package: The all in sum of your Base Salary PLUS short- and long-term incentives, variable pay, benefits, allowances, and perks.
Now that we’re familiar with the elements of pay, let’s move on to exploring your Market Rate.
Determining Your Market Rate
The first step in negotiating pay is knowing your starting point. That is NOT your current salary -- it’s an evidence-based number that you come to through research of your Role Title in the market.
Lots of things impact your salary estimate and potential pay mix:
Education and qualifications
Work experience and expertise
Job level and responsibilities
Geographic location
Industry and company size
Stage of company life cycle
Depending on the type of job, level, and stage of company life cycle, you may be offered more in base salary and less in equity and vice versa. Where you live and the workforce available in your area can have a big impact as well. Evaluate cost of labor trends in your geographic location to learn if you should be making more or less than your peers elsewhere in the country. For example, according to the US Bureau of Labor Statistics, the average cost of labor in the Seattle, WA area is $38.47/hour, whereas the national average is $29.76/hour. So Seattle workers should expect a salary almost $9/hour higher than the national average. No number will be perfect, but it WILL give you a confident place to begin negotiating from.
To determine your Market Rate, start by researching your new Role Title using different salary databases. This will give you a very good idea of what your salary should be. Here are 4 of our favorite databases:
Want a gold star? Use at least 3 databases to triangulate your rate of pay. Running on the bare minimum? Google your Role Title + “Salary” and your location.
For Hourly Employees
When it comes time to negotiate, hourly, part time, or contract employees should know both what they want to make per hour and what that equates to over the year.
To calculate your hourly salary, divide your annual salary by 2,080 (number of hours worked in a year based on a standard 40 hour week in a 52 week year).
For example: An annual salary of $50,000.00 / 2,080 = $24.04 per hour.
To calculate your yearly salary, switch it and reverse it, multiply your hourly rate times 2,080.
For example: An hourly salary of $38.47 * 2,080 = $80,017.60 per year.
Setting Your Salary Expectations
Now that you have a sense of what your salary looks like in the market, you can set your own expectations for negotiating. The strategy is to ask for more money than they will likely want to give you. You WANT them to come back to you with a lower offer, one that is hopefully above what they would have offered otherwise.
To do that, set 3 bars for yourself:
Reaching Rate of Pay: This is where you START negotiating from. This number should make you feel excited and afraid. This is your “holy crap, I never thought I could make this much money” number. When we negotiate, we want to start from here because they’ll likely negotiate you down, which is why you also need…
Preferred Rate of Pay: This is your ideal rate of pay. What you might have started with had you not had a Reaching Rate of Pay. You should still be happy with this number, and operate expecting to be negotiated down to it.
Unacceptable Rate of Pay: This is your DO NOT PASS number. Anything below this is unmanageable to cover your expenses and lifestyle. Past this, it’s time to look for other opportunities.
To Sum It Up…
Being paid equitably gives you peace of mind and confidence that your company believes in you. Knowing you’re underpaid can eat at you and leave you feeling dissatisfied at work. Take your salary into your own hands by understanding the elements of pay, doing the research to know your value in the market, and determining what is a reasonable target salary and what is unacceptable for you.
Researching your role in pay databases to target the value of your skills in the market will tell you if you’re adequately paid or if it’s time to seek a new role (the fastest way to get a raise!). Use the Pay Negotiation Worksheet to calculate your current market rate and let us know what you uncovered about your pay! Not sure where to start? Braggin Right offers Pay Negotiation Coaching to make sure you maximize your salary.
Check out Part 2: Negotiate Your Way to a Significant Pay Raise
This post was written in partnership with Olga Hasty, Compensation Consultant. Thanks Olga!
