Have you ever negotiated your compensation?
In a survey conducted last year, social-finance lending site SoFi found that out of 1,123 respondents who had at least some college education, 50.5% did not negotiate their salary or their most recent promotion. Members of the highest-earnings group in the survey, those taking home $100,000 to $150,000 annually, were by far more likely to lobby for higher income than those making less:
This chart is fascinating to me, as many who fall in the first two salary categories (earnings of between $50K and $100K, but less likely to negotiate) are nearer the beginning of their careers, where salary bumps matter most. Late-career salary hikes, even given a higher wage base, are rarely as powerful for your bottom line as those you negotiate earlier on, as earlier raises represent additional income you'll enjoy each year over decades of a fruitful career.
And yet nearly half of us, at least according to the survey above, don't even attempt to hash out our wages with our employers. This isn't difficult to comprehend. Requesting additional compensation rarely makes for an easy conversation. And it entails a negotiation in which employers often inherently have more information than you do, giving them the upper hand.
With a little research, you can improve your bargaining position going into a meeting about your salary. There are two crucial data points in compensation matters which I believe outweigh almost all others. Before you ask for a raise, you absolutely must research your own market value, and you must also have a grasp of your company's (or department's) financial wherewithal to support your raise.
Gather data on the market
It's extremely helpful to know what a person with your skills, education, length of work experience, and job title is worth to employers similar to your own. Sites like Glassdoor.com can help you gather this information -- in fact, Glassdoor even has a "personal salary estimator" you can use to ballpark your market value.
For a more nuanced view, I recommend working with a recruiter within your industry. Recruiters are generally compensated when they help you move to a new employer. But the best recruiters are interested in long-term relationships, as they understand that qualified persons may switch jobs several times within a career.
So, reach out to a recruiter to form a relationship, and be up front -- say that for now, you're simply interested in understanding where you fit in the marketplace. You may be surprised at how open recruiters will be to this proposition, knowing that in the future, there may come a time when you need to switch jobs and will tap their services in earnest.
Once you understand your market value, you can tailor your desired raise amount according to the additional value you believe you bring to your organization (i.e., what you think you're worth). If you left your company today, what about your impact would be difficult to replace? Where have you made tangible, measurable contributions to your department or team?
These are the types of objective points to emphasize in a salary-increase negotiation. If you honestly can't think of any, then consider delaying your request for greater compensation, and setting out first to make a noticeable difference in your job performance.
Gather data on your employer
You've learned about yourself; now learn about the entity issuing your paychecks. Whether you work for a micro-enterprise or a global multinational, seek to understand your company's resources before you walk in to ask for more money.
Consider that it can be more difficult to get a raise from a sprawling conglomerate which is falling on hard times than from a small, privately held business which is taking off. Of course, the opposite can hold true as well.
The point is to understand how the overall enterprise, and/or your particular department or group, is faring. Knowledge of company performance can help you capitalize when times are good, and strike a balance between advocating for your value and being respectful of tighter resources during a downturn.
It may be awkward the first time around, but it's OK to ask your manager about your employer's current financial footing. In fact, many businesses seek to increase the transparency of financial results to help align employee objectives with company objectives.
If you work for a publicly traded company, you can also read up on annual and quarterly financial reports. Familiarizing yourself with these documents may take a little work, but they're a fantastic way to gauge the relative health of your employer. Our own Fool.com website makes it easy to learn more about publicly traded companies.
Finally, a note of caution. If your employer isn't financially capable of supporting better compensation, and you deserve a higher market value, seriously consider moving on. We sometimes sacrifice optimal compensation for any number of factors -- a shorter commute, flexible working hours, attractive benefits, and so on. But in the long run, to meet your financial goals and expand that retirement nest egg which I know you're building, your compensation should increase at a steady rate.
So be persistent on this one point. And negotiate!