The most significant impact a person can have on their long term career earnings is to engage in salary negotiation early in their career. This will have a direct impact on the amount of earning potential they have in their future.
This might be considered whether it is your first job out of university or if it's a mid-life job change. Further, there are financial impacts when you are in your career working for an employer that you are very happy with, of not negotiating your salary with the best timing.
Throughout your career, you may earn pay increases or promotions within the company that you work for, but take as an example, when the company offers scheduled raises, as most companies do, the impact of your intitial salary with that company is measurable.
This is not only applicable to your first salary negotiation and subsequent incremental pay raises but also to salary differentials you may get when you changes roles within a company. You may switch into a job requiring significantly increased duties, effort, or responsibilities, and the salary you had earned beforehand can genuinely influence the starting salary at the new job.
Take a person starting a career as a system analyst in a high tech company somewhere in the United States, as an example. Say that person begins with a starting salary of $45,000. Most likely that person will have to dedicate at least 6 months to one full year before they are offered their first raise. Suppose it is a 10% raise which would be A LOT in most businesses. That person would gain an additional $4500 yearly based on that raise.
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 level after one full year of work and after a 10% pay raise, while in the second scenario the employee would be at over $60,000 per year after a 10% raise.
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.
Introduce the 10% raise after year one and consider the impact as the person continues through their career. The person with a better salary in the beginning will always be ahead of the person with the lower starting salary, ceteris parabis (i.e. same job, same performance). The person with the higher salary negotiation will be inching ahead faster than the person starting with the lower salary. This impact accelerates with each passing year assuming the same % annual pay raise for each.
When requesting a pay raise, if a person earning $50,000 earns a 5% raise without negotiating anything more, that's not bad. But consider the impact if the person negotiates a 15% raise because they have outperformed in the job and they have all the supporting research and a track record to warrant it. That employee will have negotiated salary - $7,500 in a raise versus just accepting $2500. Multiply that by 10 years, and there is a $50,000 impact on the person's earning 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.
We must also consider factors such as the job market, company guidelines, and on the job performance. However when well executed, it can really pay off. Remember to consider the importance of all factors of compensation when in salary negotiation. Some people truly value their spare time and quality of life, while others are willing to venture out and accept stock options instead of extra salary.
However, when it comes to negotiating, don't be afraid to consider asking for more. - 20765
This might be considered whether it is your first job out of university or if it's a mid-life job change. Further, there are financial impacts when you are in your career working for an employer that you are very happy with, of not negotiating your salary with the best timing.
Throughout your career, you may earn pay increases or promotions within the company that you work for, but take as an example, when the company offers scheduled raises, as most companies do, the impact of your intitial salary with that company is measurable.
This is not only applicable to your first salary negotiation and subsequent incremental pay raises but also to salary differentials you may get when you changes roles within a company. You may switch into a job requiring significantly increased duties, effort, or responsibilities, and the salary you had earned beforehand can genuinely influence the starting salary at the new job.
Take a person starting a career as a system analyst in a high tech company somewhere in the United States, as an example. Say that person begins with a starting salary of $45,000. Most likely that person will have to dedicate at least 6 months to one full year before they are offered their first raise. Suppose it is a 10% raise which would be A LOT in most businesses. That person would gain an additional $4500 yearly based on that raise.
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 level after one full year of work and after a 10% pay raise, while in the second scenario the employee would be at over $60,000 per year after a 10% raise.
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.
Introduce the 10% raise after year one and consider the impact as the person continues through their career. The person with a better salary in the beginning will always be ahead of the person with the lower starting salary, ceteris parabis (i.e. same job, same performance). The person with the higher salary negotiation will be inching ahead faster than the person starting with the lower salary. This impact accelerates with each passing year assuming the same % annual pay raise for each.
When requesting a pay raise, if a person earning $50,000 earns a 5% raise without negotiating anything more, that's not bad. But consider the impact if the person negotiates a 15% raise because they have outperformed in the job and they have all the supporting research and a track record to warrant it. That employee will have negotiated salary - $7,500 in a raise versus just accepting $2500. Multiply that by 10 years, and there is a $50,000 impact on the person's earning 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.
We must also consider factors such as the job market, company guidelines, and on the job performance. However when well executed, it can really pay off. Remember to consider the importance of all factors of compensation when in salary negotiation. Some people truly value their spare time and quality of life, while others are willing to venture out and accept stock options instead of extra salary.
However, when it comes to negotiating, don't be afraid to consider asking for more. - 20765
About the Author:
Trevor Davide Grant is a IT project manager in the IT field and has significant experience at salary negotiations. Trevor has worked for large telecom, electric utilities, software development consulting, and a prevalent social networking website. He has learned how to negotiate a salary in the most effective way. Learn great tips on the topic of salary negotiating at www.HowToNegotiateASalary.com
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