The Insider Guide to Careers
Insider information, secrets and tips about getting hired and building careers. For employees and job candidates.
Even the most experienced job seekers face issues navigating the job search process, especially the last part of it – the offer process. I will not delve in-depth into the negotiation process in this post. Instead, I will focus on the aspects of compensation that people miss out on when evaluating offers.
1) Do your competitive research on companies:
I am not a fan of online salary data, but there is a reason why you should be visiting Glassdoor.com, Levels.fyi, and Teamblind. The data posted on those sites are typically from folks at the 80th to 95th percentile. You want to ask for the highest salary possible when negotiating your salary. In many companies, the highest compensation possible is typically around the 90th percentile. I will write in another post why asking for more than the 90th percentile numbers is a doomed exercise. The data on online sites is a poor indicator of median 50th percentile data but is an approximate indicator of the 80-90 percentile. The other advantage of online sites is that you can read a lot of comments about company culture, pros and cons, issues in the company, teams to avoid, and so on. This information can be a gold mine as you try to get a sense of the company and team culture. Finally, be ready with verifiable and concrete data about why you think the way you do. You will be surprised at how much information about the company you can gain from annual reports. They may sometimes reveal details of the compensation strategy and the competitive group of companies.
2) Understand the mind of the recruiter:
Remember that the recruiter is actually your friend. A recruiter’s job is to close the job posting as soon as possible and begin working on the next role. The entire process, from start to finish, could take around 60-100 days. The happiest person after you get the job will be the recruiter. The recruiter represents you to the hiring manager and takes their feedback to you. They have their opinions, but typically they are subservient to the views of the hiring manager. Always be extra courteous with recruiters. Just a few kind words can bring you tens of thousands of dollars in additional compensation. Every human has a gut feeling about other people, and you don’t want to end up behaving obnoxiously to recruiters.
You want them to fight for you and represent you to the business. Be truthful to recruiters about what you expect, and if you get what you wish for, reciprocate accordingly. Destroying bridges with recruiters could be detrimental as recruiters frequently move across companies, and the last thing you want to see is that recruiter being on the selection panel. The level of data asymmetry between the company and the job applicant is vast. Even in extreme cases, it may be the tenth or fifteenth job search for an employee, but a typical recruiter has easily handled thousands of new hires. They will know more about the process than you ever will. Do not underestimate their skills. Every question they ask will have a purpose. Eventually, even after you accept the offer and think that you got the best possible offer, remember that the company always wins. This situation is just like the gambling casinos where the house always wins. I have seen so many cases where the new hire thinks they had the best possible offer (at the 90th percentile or above), but it turns out that employees ended up near the 70-75th percentile. No applicant can get the highest possible base or sign-on numbers, so don’t even bother. Applicants should instead focus on getting to the numbers they can live with. Sometimes, recruiters could be smooth-talked and inordinately impressed by the high falutin talk of the applicants. In the absence of reliable data beyond the resume and Linkedin profiles, recruiters and hiring managers often need help with what to believe and what not. Only a few solutions have emerged to solve this problem. I am working on an AI solution to help recruiters get multiple verified data to help them make better hiring decisions, but more on that in a separate post.
3) Variable compensation and one-time compensation:
Let us face it, negotiating on base compensation is the hardest. Base compensation is critical as compensation surveys and salary tables focus on base rather than total compensation. The company will have to pay every dollar of additional base compensation into perpetuity as long as you work, and there is no clawing it back. Components like sign-on bonuses, relocation bonuses, etc., are much easier to negotiate. Rules for relocation bonuses are rigid, and there is little leeway if you are not eligible. At the same time, you can use the excuses of family needs or not getting relocation to argue for a higher sign-on bonus. Often, the sign-on bonuses come straight from the recruiter’s budget rather than from the business. Hence the business is more likely to offer it, as it doesn’t hurt their budget. These are also one-time grants and can be clawed back if you leave early (approx two years), giving companies greater flexibility in offering them. Remember that however terrific an interviewee you are, the company is yet to see you thrive and excel in the workplace. Past success is no guarantee of future success. Hence to play it safe, the company is trying to place you at the 50th percentile or lower, and you are trying to position yourself at the 80th percentile or higher. There is an inherent conflict, and that is fine. Every company has to settle somewhere in between based on how much the job applicant negotiates.
4) Always look at benefits:
Benefits can be an essential part of compensation, making up to 30% of total comp. Be wary of a company that focuses on high compensation and neglects benefits. These companies typically only expect you to serve short-term. Companies can easily increase direct compensation, decrease benefits, and keep the total compensation numbers down. Sometimes based on family circumstances, health insurance or the number of days of PTO may be very important for you. In insurance, employees could cross-check if there are higher employee co-pays when it comes to medical insurance, lesser options for employees, and higher deductibles.
Another tactic is matching the 401k contribution. Some employees completely ignore the 401k match contribution when it comes to evaluating compensation, even though it is direct cash paid out by the company. If a company is offering 95k in base compensation and offering to do an 8% 401K match, it is better than another company giving you a 100k offer and a 2% 401k match. Since 401k is a long-term investment and pretax, it is much better than actual cash in hand. Factor each benefit in detail. In India, the situation is different where the government manages the pension funds, unlike the US where the entire risk is borne by you. Most Indians forget that American employees get a 401k match which can be an additional 4-7% of compensation, if not more. Because employees also have to match an equal amount, this investment over a long time (25-30 years) can be substantial. No friend will talk of 401k match unless unless somebody explicitly asks about it.
Beware of unlimited paid time off. Many companies try to paint unlimited PTO as a perk to employees, but the truth remains that without a clear demarcation of the number of days one can take off, PTO remains unspent. Also, if the team managers don’t take time off, employees may think that PTO can impact performance reviews and bonuses. One additional point is that with unlimited PTO, typically, there is no accrual policy. Hence companies avoid paying for unspent PTO, which is beneficial to bring costs under control. Make sure you have a detailed conversation with the hiring manager on all these topics.
In India, remember that a high basic salary means your taxes could increase dramatically. The best companies would give you a choice to configure your salary so that you can optimize your take-home compensation after all deductions.
5) Always have a backup plan and a BATNA:
If you want to negotiate seriously, you should have multiple options and be ready to walk away from the company you are interviewing with. On the other hand, if you are desperate for a job or badly want to get into your dream company, there are only so many options for you. You can try a poker face and negotiate hard, but the trained recruiters and the company can always see the bluff. You will be 100% effective only if you believe in something 100%. Hence, when you are ready to look out for jobs, never stop at one application. Always try to get multiple offers.
Similarly, you should have some numbers in mind for compensation which is the lowest you can accept. You should keep the numbers private even though every recruiter will try their best to make you disclose your expectations. A metaphor to remember – you are selling yourself during negotiations, and you always want to make a profit. Get a salary or HR coach to help you with the negotiation. At the very least, don’t keep your plan of action to yourself. Even somebody like a good friend will give you valuable external perspectives on the gaps in your strategy and help you think more clearly. Remember that whatever happens, there is always room for further negotiation.
You can only negotiate if you have impressed the business and HR interviewers. If any of them think that you are not as good as you claim to be, that will impact your interviewee evaluation and compensation benchmarking. You will never know your impact on the interviewers, but you could sense signs from the recruiter that you are overshooting the limit and need to be more realistic. Take those words seriously, and always keep asking how your interviews went. That data can be immensely helpful in negotiations.
The best negotiators always talk about how the skills in the job description are a perfect fit for their skills, how there could be no better fit for the role, and what the company can gain from hiring them. With every negotiation, each side should think it is winning. By just focusing on compensation, the discussion becomes one-sided. The company should also see benefits. Examples include being able to hit the ground running, needing less time training, being self-driven, being part of the solution rather than being a nitpicker, and just being an optimistic person willing to work their socks off. Negotiation is challenging; it could stretch for weeks and involve many conversations. This way, you get to meet many colleagues and stakeholders. If companies take time to come up with a counteroffer, it is a good thing as it means that they are dealing with comp numbers well above the median and hence getting multiple approvals from senior leaders. So never give up and be patient.
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