Salary ne­go­ti­a­tions – how salary increases work

Everyone would like to earn more money – but raising the issue of salary increases in front of superiors is very un­pleas­ant for many. Very few people know exactly how to proceed: If you come off too strong when pre­sent­ing your salary ex­pec­ta­tions, your employers may be put off. On the other hand, if you are too yielding and willing to com­pro­mise in a salary ne­go­ti­a­tion, you may not get what you want or deserve. It is therefore important to consider a good strategy in advance as to how you’re going to proceed when asking for a raise.

In principle, there are two different sit­u­a­tions in which a salary ne­go­ti­a­tion might take place – either before being hired as an applicant or during a per­for­mance review. Depending on the scope of the procedure, the issue of money will be raised at some point during the ap­pli­ca­tion process. Of course, there are jobs where it is not possible to have a proper salary ne­go­ti­a­tion – man­age­ment has fixed an hourly wage and ap­pli­cants can either accept or choose not to accept the position. A col­lec­tive wage or salary agreement makes ne­go­ti­at­ing su­per­flu­ous, since the topic of re­mu­ner­a­tions has already been con­trac­tu­al­ly de­ter­mined.

Contracts in the US are fairly flexible, only being re­strict­ed by either statutory or a col­lec­tive­ly agreed upon minimum wage. The two con­trac­tu­al partners (employee and employer) jointly agree on the starting salary. A first ap­prox­i­ma­tion to the ne­go­ti­a­tion might take place during the first moment of contact. Many employers ask ap­pli­cants to state their ap­prox­i­mate salary ex­pec­ta­tions in the job ad­ver­tise­ment. This saves time for both parties – if it can be seen in advance that an applicant expects far more money than the employer is willing to pay, an interview isn’t worth having. If the expected salary and the amount the employer is willing to pay are similar, it is a good starting point for a salary ne­go­ti­a­tion to take place.

However, the word “starting salary” makes clear that it is just the first step in the salary ladder. Through­out the course of your career in a company, you will probably have the op­por­tu­ni­ty to negotiate salary increases again at later stages. It is not unusual to ask the employer to rene­go­ti­ate your salary once a year. Longer service and the resulting greater ex­pe­ri­ence alone can be a reason for a higher salary. If you have taken on more tasks or re­spon­si­bil­i­ties in the past months than at the beginning of your em­ploy­ment re­la­tion­ship, then you can justify your en­ti­tle­ment to a salary increase – the same applies if you dis­tin­guish yourself per­ma­nent­ly through excellent work per­for­mance.

General inflation can be an ad­di­tion­al argument to increase wages and salaries. Although a pure inflation ad­just­ment does not mean that you have more money in your account, it also does not mean you have less. However, beware: Very few employers will pay you a higher salary just because of the inflation.

Another reason for salary ne­go­ti­a­tions is if you get a promotion to a new position with new tasks and more re­spon­si­bil­i­ty. Your employer knows that you won’t settle for your same old salary. Before signing the new contract, salary ne­go­ti­a­tions usually take place.

As far as the strategy in salary ne­go­ti­a­tions is concerned, it must first of all be pointed out that two parties are always involved in these ne­go­ti­a­tions. That is to say: Adapt your strategy to your coun­ter­part. Some bosses like self-confident, bordering on ag­gres­sive behavior. Others require more diplomacy and tact. Nev­er­the­less, there are tips that you should def­i­nite­ly take into account.

During starting salary ne­go­ti­a­tions, different ap­proach­es have proven to be more suc­cess­ful than in the later salary increase ne­go­ti­a­tions. For this reason, we have divided our tips for you.

During a salary ne­go­ti­a­tion that is happening during the ap­pli­ca­tion process, there is one major dis­ad­van­tage: You don’t yet know your ne­go­ti­at­ing partner, so you don’t know what kind of salary they are expecting or what kind of ne­go­ti­at­ing technique they prefer. Since it’s difficult to find out about these factors within a few days, you must therefore con­cen­trate on for­mu­lat­ing an ap­pro­pri­ate salary ex­pec­ta­tion that is customary in the industry during the ap­pli­ca­tion process. During the ne­go­ti­a­tion itself, you should not be too dogged (this is more deterring), but do not take the salary ne­go­ti­a­tion too lightly either: Your salary may increase in the following years, but only in relation to the initial salary.

It is worth spending enough time on research. On the internet you will find numerous websites that show the average salaries in the various sectors and oc­cu­pa­tion­al fields. In the best case, you will research the company during interview prepa­ra­tion. On the one hand, you should be able to estimate how suc­cess­ful the company is in com­par­i­son to its com­peti­tors, and on the other hand, how much the company invests in its employees. On some websites, employees evaluate companies in terms of benefits and salary – such in­for­ma­tion can help you a lot in your as­sess­ment.

Anyone who mentions a very low starting salary at the interview not only risks the chance of losing out on a higher salary, but also the promise of the job itself. If you state a very low salary ex­pec­ta­tion, this might make the employer sus­pi­cious. You are sending the signal that your work is not par­tic­u­lar­ly valuable and you have already been rejected by many job in­ter­views, which is why you’re offering your skills for the lowest price.

However, the other extreme when it comes to salary ex­pec­ta­tions is just as bad. Most employers have a planned salary range which they don’t disclose (this would weaken their ne­go­ti­at­ing position). If your ex­pec­ta­tions are higher than that, you have often already dis­qual­i­fied yourself. Remember that you aren’t the only candidate. Although salary ex­pec­ta­tions are by no means the most important argument in the selection process, if a com­peti­tor with similar qual­i­fi­ca­tions demands a lower salary, it is very likely that they will opt for it.

Although a self-confident ap­pear­ance is never a mistake, career starters who have just completed their training or studies can focus too much on securing a lucrative salary, which often acts as a deterrent to personnel and employers. In general, the employer should not get the im­pres­sion that you are only in­ter­est­ed in the job because of the money, so don’t mention the salary too early on in the interview. In most cases, the person you are talking to will address the issue on their own anyway.

Employee benefits are not just limited to the salary. Many companies also offer ad­di­tion­al benefits that you should take into account when ne­go­ti­at­ing your salary. A thir­teenth month’s salary or Christmas bonus sig­nif­i­cant­ly increases the annual salary and may offset a com­par­a­tive­ly low monthly salary. You should also consider ad­di­tion­al benefits like re­tire­ment pro­vi­sions, company cars and season tickets when ne­go­ti­at­ing your salary.

In contrast to ne­go­ti­at­ing your starting salary, you have the advantage of being able to assess your coun­ter­part better – and the other side knows you too – when asking for a raise during an existing em­ploy­ment. Use your knowledge to your advantage.

If you are waiting for your employer to offer you a raise, you will be waiting a long time. Be proactive and address the issue yourself. This also applies to the ne­go­ti­a­tion itself: You should take away the first step and give a number – in most cases, your su­per­vi­sor will ask you to do so anyway. Don’t stack the bid too low. The first number has a big effect on the final result of a ne­go­ti­a­tion. Orient your first bid on the size of the company and consider what you know about the company’s success.

They won’t approve a raise just because you asked nicely. Give good reasons and prepare them. It is not a problem to bring notes into your salary ne­go­ti­a­tion. These can even help you to conduct the meeting on a factual level. Refer to past successes, special achieve­ments and ac­cu­mu­lat­ed ex­pe­ri­ences as arguments for a salary increase. Even years of company af­fil­i­a­tion can be a reason for a salary increase – loyalty should be rewarded, after all. Private reasons, on the other hand, should not be mentioned during a salary ne­go­ti­a­tion. Even if they are sym­pa­thet­ic, it is ir­rel­e­vant to your boss whether or not you need the money because of a change of situation in your life outside the workplace. Referring to other col­leagues is also a bad idea. Just because an increase has been approved for someone else, it does not mean you are entitled to a wage increase. If you have performed well at work, then this should be suf­fi­cient as an argument in itself. However, if you argue instead that other people have a higher salary despite having a worse work per­for­mance, this will quickly make you seem un­sym­pa­thet­ic, without bringing you any closer to your goal.

If they feel that they are forced into a corner or are not suf­fi­cient­ly valued during the salary ne­go­ti­a­tions, many employees begin to threaten their superiors with leaving. However, the supposed ace in the hole proves coun­ter­pro­duc­tive. On the one hand, you are being overly ag­gres­sive (never good in a ne­go­ti­a­tion situation) and on the other hand, you are revealing your lack of loyalty to your employer. Why should your boss pay you more if you are going to leave your position as soon as a better offer comes along?

Once you make your bid – as long as it is within reason – your ne­go­ti­at­ing manager will propose a counter offer. The rule is: Never accept it! Ex­pe­ri­enced ne­go­tia­tors first name a bid that is lower than what you are really willing to pay. With the counter-offer, your boss has proven that they are ready to negotiate. Come forward and explore what the scope for ne­go­ti­a­tion is.

During a ne­go­ti­a­tion, you should be both self-confident and willing to com­pro­mise. At least two parties take part in the ne­go­ti­a­tion and it is not advisable to refuse to ac­com­mo­date in any other way. You can prove your flex­i­bil­i­ty by accepting other re­mu­ner­a­tion instead of just a higher monthly salary: You also benefit from company tickets, petrol allowance, and employee discounts. Special leave or more flexible working hours can also be an issue in salary ne­go­ti­a­tions.

Ne­go­ti­a­tion experts recommend some tricks that you can use before or during a salary ne­go­ti­a­tion. One lin­guis­tic detail, for example, is that you should not even ask for a raise. The phrase salary ad­just­ment sounds much less demanding. As soon as you name your first request, choose a precise, odd number. If you choose an even one, this isn’t nec­es­sar­i­ly bad, but a precise odd number will look like you have cal­cu­lat­ed your raise precisely – even if this isn’t the case at all.

You can also take advantage of the Benjamin Franklin effect: If someone has already done you a favor, that person will be more willing to continue to do you a favor. So shortly before the ne­go­ti­a­tion, create a situation where your boss is doing you a simple favor. This could make the sub­se­quent ne­go­ti­a­tion easier. The tip to say yes works in a similar way. If you get someone to say yes several times, that person tends to agree shortly af­ter­wards. You can create these sit­u­a­tions during the initial small talk right before the salary ne­go­ti­a­tion. If your boss says the word “yes” several times, the prob­a­bil­i­ty increases that they will say the same to your demands.

An essential key to a suc­cess­ful salary ne­go­ti­a­tion is to formulate a good salary ex­pec­ta­tion. If you know how much your per­for­mance is worth, you can be more confident in the ne­go­ti­a­tion and minimize the risk of ex­ag­ger­at­ing or selling yourself below value. The salary you can expect depends on several factors. In addition to the industry, these are primarily the size of the company, its location, your ex­pe­ri­ence, and your education.

• Company size: As a rule, larger companies also pay higher salaries. Es­pe­cial­ly companies with more than 500 employees are usually well above the industry average.
• Company location: The salary also adjusts to the cost of living, which varies from location to location. For example, an employee in New York earns more than in other US cities, but also has to pay sig­nif­i­cant­ly more in rent.
• Ex­pe­ri­ence: Employers place a high value on work ex­pe­ri­ence. Someone with years of ex­pe­ri­ence therefore usually receives a much higher salary than a young pro­fes­sion­al. The same applies to the length of time they have been with the company.
• Education: Your ed­u­ca­tion­al level is also decisive for your salary. For example, someone with a master’s degree usually earns more than someone with a bachelor’s. Good grades can influence your salary. Con­tin­u­ing education also plays a role.

It is es­pe­cial­ly difficult for career starters without an insight into the industry to determine a benchmark. However, there are several databases on the internet that provide in­for­ma­tion on average salaries in different oc­cu­pa­tion­al fields and at different locations.

• Indeed.com: Indeed.com allows you to compare salaries for com­pa­ra­ble roles ad­ver­tised on their website. Just enter the company name or type of job you would like and see average salaries that you can use to base your own salary ex­pec­ta­tions on.
• Salary.com: Salary.com also offers a free “What are you worth cal­cu­la­tor?” to help you compare salaries in your field. However, what makes this service stand out is that you can also add a location to your search, so you can localize your salary goals ac­cord­ing­ly.
• Glassdoor.com: Glassdoor.com has its own salary and com­pen­sa­tion com­par­i­son service, as well as a net worth es­ti­ma­tion service which will help you know how much money you should be ne­go­ti­at­ing depending on your education and ex­pe­ri­ence.

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