Conversations that reduce your value to dollars and cents can elicit anxiety, anger, jealousy or pride. But salary negotiations shouldn’t be fraught with feelings. Instead, workers should approach them with a cool focus on the…
Conversations that reduce your value to dollars and cents can elicit anxiety, anger, jealousy or pride. But salary negotiations shouldn’t be fraught with feelings. Instead, workers should approach them with a cool focus on the facts about what their skills are worth.
“The best thing to do to take the emotion out of it is arm yourself with data,” says Katie Bardaro, vice president of data analytics at PayScale. “Trying to become informed about your market value is what’s going to lead you to success.”
Calculating your worth is the first step in the negotiation process. The effort it takes will pay off for years to come, especially for people of color and women, who on average make less money than their white and male counterparts.
“Understand how valuable that conversation is going to be to yourself and earnings, and give it the respect it deserves,” says Ryan Sutton, district president for Robert Half human resources consulting firm.
How Companies Set Salaries
When calculating salary offers, employers consider many factors. They look internally at their budgets, the wages of their current employees who have similar roles and the value of the nonfinancial benefits they provide, like vacation time and flexible hours. They look externally at fair-wage laws and market data, figuring out what competitors pay.
And they consider the unique qualifications of each candidate, assessing the worth of his or her education and certifications, years of experience and skills.
“If you’re a rock star, they’re going to overpay to get you in the door,” says Alys Scott, chief marketing officer at Salary.com.
Many companies have organized salary structures that proscribe wage ranges for each job title. Except under unusual circumstances, candidates will receive salary offers that stick within the defined range for their respective roles. Organizations may share information about these paygrades, like the federal government does, or they may keep that information confidential to the human resources department.
It’s usually in a company’s best interest to offer competitive salaries to prevent high worker turnover. Every year, as part of her job as vice president of human resources and safety, Paula Harvey conducts a compensation analysis of typical wages for welders and other construction workers in the locations where Schulte Building Systems, a construction manufacturer, operates.
“It’s important that companies do know what that market will bear,” Harvey says. “You want to offer something so somebody will stick around.”
But some organizations simply pay poorly compared to their peers.
“There are low payers out there. In this economy it’s hard to attract and retain with that method,” Scott says.
Workers should conduct just as much research about fair salary offers as employers do.
Start by exploring digital databases that provide free information about pay. Most systems incorporate factors such as job title and geographic location to provide wage ranges, and some even create personalized salary profiles. Many tools identify a median wage within the range. Half of workers can expect to make more than the median, and half can expect to make less. Some ranges also point out salaries that fall at the 10th, 25th, 75th and 90th percentiles.
Employers rely on some of these same tools to set their compensation rates. Eighty-two percent of 7,100 employer respondents use two or more sources of market data, according to PayScale’s 2018 Compensation Best Practices Survey.
Before using them, it’s important to understand the strengths and weaknesses of each system, all of which have flaws and biases.
“No dataset is perfect,” Bardaro says.
Below are some of the tools available to help workers calculate their market value:
Bureau of Labor Statistics Occupational Employment Statistics
Data source: employer reports
The federal Occupational Employment Statistics program creates wage estimate data for more than 800 occupations at the national, state and city level. They’re based on the results of a government survey of employers administered every two years, which means the data prioritizes accuracy over timeliness. This source informs the U.S. News Best Jobs rankings.
Glassdoor.com is best known for its company profile pages, which allow employees to anonymously post qualitative reviews about office culture, benefits and hiring interviews.
Profiles contain salary ranges for different job titles. This data is self-reported by employees. Employers cannot change it.
Some experts question the validity of self-reported data. But on an anonymous site like Glassdoor, “there really isn’t a reason to fabricate your salary,” says Alison Sullivan, Glassdoor community expert.
However, users should keep in mind that some company profiles have small sample sizes for their job titles, which may make that data less reliable. Sullivan recommends looking for job title datasets with at least 10 salary reports, and ideally 20 or 30.
If a job title at a particular company has fewer than 10 salary data entries, “that’s when it’s really important to look at the competitors,” Sullivan says.
Glassdoor also has a tool called Know Your Worth that provides users with a personalized market value estimation based on information such as years of experience, current base pay and geographic location. How accurate is it? When Glassdoor tested the model on real workers, half of its estimates were within 11.8 percent of the workers’ reported new salaries, while half differed by more than that.
For about half of the job advertisements listed on the website, Glassdoor calculates a base salary estimate using algorithms that learn from data offered by employees and third-party sources. Employers can elect to contact Glassdoor to provide more accurate information, and if they do, the posted salary will be labeled “Employer Provided.” The median error is about 13 percent, according to the company.
Data source: employer reports
Salary.com sends surveys to 25,000 employers in the U.S. and around the world to collect compensation data that it sells to companies. It also uses this data to create free personalized salary range reports for workers. The public-facing site offers information on 4,500 job titles.
Getting data directly from companies is an advantage of using Salary.com, Scott says: “You will probably have a harder time when you approach an HR professional with consumer-reported data.”
Data source: worker reports
The LinkedIn system works similarly to Glassdoor, asking workers to anonymously report their salaries to generate estimates about pay ranges for job titles in different geographic regions and at specific companies.
LinkedIn also provides salary estimates on many job advertisements. Employers have the option of providing more precise salary figures.
PayScale.com takes a crowdsourced approach to collecting salary-range data, asking users to fill out detailed surveys with information about their current salaries, education credentials, years of professional experience, management responsibilities and noncash benefits. The answers workers provide during each section of the survey affect which questions they’ll see next.
Collecting 150,000 new survey records from workers each month, Payscale offers salary information for 15,000 job titles. The company only produces reports for positions about which it has enough data to yield “statistical confidence,” Bardaro says.
People who take the survey are rewarded with a personalized report designed to help them assess the fairness of their current wages or a new salary offer.
“Your place within your range lets you know how you compare to others just like you,” Bardaro says. “Where are you relevant to the midpoint? If you’re below that, you can interpret that as you’re underpaid. The caveat is it depends on the compensation strategy of your organization.”
People who don’t take the survey can still search the website for more generic salary information based on job title, company name or degree earned.
Databases use different formulas and therefore produce different results. It’s helpful to use more than one when figuring out your market value.
For example, below are salary ranges proposed for:
— a mechanical engineer in Milwaukee who has a bachelor’s degree in mechanical engineering and seven years of full-time professional experience
— an actuary in Los Angeles who has a bachelor’s degree in economics and 12 years of full-time professional experience
— a physician assistant in Indianapolis who has a master’s degree and three years of full-time professional experience
Those three professions are among the most frequently searched and viewed jobs in the U.S. News Best Jobs rankings. Of the 125 most-populous metropolitan areas in the U.S., Milwaukee’s cost of living falls near the middle, while Los Angeles is one of the most expensive and Indianapolis is one of the least expensive cities.
Mechanical engineer, Milwaukee, seven years of experience
Bureau of Labor Statistics
$54,310 (10th percentile)
$52,000 (10th percentile)
$60,000 (10th percentile)
$89,027 (25th percentile)
$112,200 (90th percentile)
$98,000 (90th percentile)
$91k (90th percentile)
$106,005 (75th percentile)
Actuary, Los Angeles, 12 years of experience
Bureau of Labor Statistics
68,650 (10th percentile)
$98,000 (10th percentile)
$87,000 (10th percentile)
$131,713 (25th percentile)
$162,140 (90th percentile)
$155,000 (90th percentile)
$193,000 (90th percentile)
$160,347 (75th percentile)
Physician assistant, Indianapolis, three years of experience
Bureau of Labor Statistics
$43,340 (10th percentile)
$75,000 (10th percentile)
$72,000 (10th percentile)
$92,490 (25th percentile)
$125,970 (90th percentile)
$115,000 (90th percentile)
$107,000 (90th percentile)
$110,780 (75th percentile)
Talking to Peers
Workers in the private sector have the right to discuss their salaries, thanks to the National Labor Relations Act of 1935. Just because it’s legal doesn’t mean it’s easy, however.
“It’s tough because there is still a stigma about the appropriateness of talking about money,” Sutton says.
But asking peers about their salaries is one of the best ways to get a realistic idea about what specific companies pay. It’s also helpful for making sure you’re being compensated fairly compared to your co-workers.
“I tell people to talk about their salaries all the time,” Scott says. “When you’re in an organization and building friendships and alliances, it’s OK to have those conversations.”
If you’re considering a position at a new company, ask current and former employees about its pay practices using phrases such as these:
— What salary range would be reasonable for me to expect there?
— What are the pay grades at this company?
— How does pay at this company compare to pay elsewhere?
— This is what I think the market rate is for the position, does that match what this company offers?
Use your database and peer-to-peer research to calculate your value as a worker. This will probably be a range rather than one specific number because of all the variables involved in compensation.
Then, develop a strategy for securing a salary within that range through negotiation. This process, called benchmarking, requires identifying three figures: the amount you’re targeting, the amount you’ll ask for and the lowest offer you’re willing to take.
Workers should always ask for more than their target because it gives them room to haggle with employers, according to the negotiation curriculum developed by the American Association of University Women. How much more? Many employers will aim for the median, so Scott recommends workers ask for the 75th percentile, especially when the economy is strong and there’s tight competition for labor.
No matter what amount you ask for, if you have data to support it, you’ll be able to “walk in the room prepared and ready to counter,” Scott says.