The Science of Salary Negotiations when Changing Jobs
The Science of Salary Negotiation when Changing Jobs
Salary negotiation is more of a science than an art if one does proper research and follows certain checklists below. While the blog is tailored to the Indian job market most of these principles are valid globally.
Understand the Motivation of the Counter-party
Understanding who your counter part is and their motivation is the most important part of salary negotiation. Who is your most important counter party? The Recruiter.
Few things are very important to understand here. The recruiter is not your friend so DO NOT deal with them like one. Also understand that recruiting is a specialized function and should not be clubbed with/mixed with the other HR function of any medium to large organization. Understand what a recruiters key performance indicator (K.P.I.) looks like:
- Closing the position as soon as possible
- Closing the position for as low a salary as possible
Given the above you need to craft your strategy. Some objective tips on how to deal with The Recruiter:
- Need: Show that you are not looking for a change. NEVER give any concrete reason on why you are looking for a change. It will never help you. If you must say you are looking for a better compensation.
- Time: You have all the time in the world. That is the perception that you must build. The moment you show desperation you will be short changed on salary.
- Salary Expectations: You get what you ask for. The minimum raise that you should ask for should not be less than 30%. If time is on your side asking a 50% jump is not unreasonable. Have them sell the position to you.
The Quantitative Stuff:
Develop a good understanding of your current compensation and benefits. Never negotiate of just the gross salary. You should look at the total package holistically. These are the dimensions on which you must evaluate and negotiate your compensation package:
- Salary Structure:
- Tax Efficiency of the Salary Structure: Do not make the mistake of simply comparing the fixed to fixed. The tax saving options that an organization provides can significantly skew your post tax salary. There are run of the mill tax saving options for which there is little adminstrative overhead that an organization needs to incur and then there are other options that employee friendly organization will provide. Seek information on what are these options. Triangulate this information with your network and DO NOT TRUST the word of the recruiter unless they give it you in black and white.
-- Run of the Mill Options:
---Section 80C (PPF, ELSS, Life Insurance etc.),
---Section 80CCD(1B) (Contribution to NPS by you)
---Section 80D Medical Insurance Premium
- Other Benefits
- Variables
- Stock Grants
- Stock Options
Given the above you need to craft your strategy. Some objective tips on how to deal with The Recruiter:
- Need: Show that you are not looking for a change. NEVER give any concrete reason on why you are looking for a change. It will never help you. If you must say you are looking for a better compensation.
- Time: You have all the time in the world. That is the perception that you must build. The moment you show desperation you will be short changed on salary.
- Salary Expectations: You get what you ask for. The minimum raise that you should ask for should not be less than 30%. If time is on your side asking a 50% jump is not unreasonable. Have them sell the position to you.
The Quantitative Stuff:
Develop a good understanding of your current compensation and benefits. Never negotiate of just the gross salary. You should look at the total package holistically. These are the dimensions on which you must evaluate and negotiate your compensation package:
- Salary Structure:
- Tax Efficiency of the Salary Structure: Do not make the mistake of simply comparing the fixed to fixed. The tax saving options that an organization provides can significantly skew your post tax salary. There are run of the mill tax saving options for which there is little adminstrative overhead that an organization needs to incur and then there are other options that employee friendly organization will provide. Seek information on what are these options. Triangulate this information with your network and DO NOT TRUST the word of the recruiter unless they give it you in black and white.
-- Run of the Mill Options:
---Section 80C (PPF, ELSS, Life Insurance etc.),
---Section 80CCD(1B) (Contribution to NPS by you)
---Section 80D Medical Insurance Premium
- Other Benefits
- Variables
- Stock Grants
- Stock Options
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