Congratulations! Are you being considered for a promotion in your current company or being offered a new job? This is an exciting time. It is time to leverage this opportunity to build real wealth. Changing jobs or getting promoted is the best way to break out of the 3% raise year after year. Many people know they can negotiate their salary at a new job/role, but did you know that as you progress in your career, you are more likely to be able to negotiate additional valuable benefits?
As you read, think about how you plan to approach this negotiation. Most people only think to negotiate on salary because that’s the most visible number. However, did you know that in 2018 only 39 percent of workers negotiated salary at their last job offer? More men than women negotiated, but surprisingly, younger workers negotiated more than older ones. Generation X was in the middle, at 40% of workers negotiating. By 2020, 54% of workers negotiated for higher pay during their last job offer.
Negotiation is like a dance between you and your potential employer/manager. It is important to start by making sure the job is one you want. No amount of salary or other benefits will make a bad career move into a good one. Also, the employer has to want you. This is not a list of demands to make before you get a sense of mutual interest.
Instead, think of the items below as ways to close the gap between what they are offering and what you want. There will be some give and take as you learn more about what the company/position can accept. If you have a few must-haves, communicate those directly and honestly. Focus on how to get to agreement in a way that will meet the needs of the company and yourself. Finally, listen for signs they won’t negotiate anything. This may be a sign of what kind of opportunity you can expect in the future.
Salary – Because salary is generally the largest component of your compensation package, a small increase can go a long way. Increases also compound over time – which benefits you even more if you are in the early to mid-career stages. Higher salary means increased ability to save for long and short-term goals and get ahead financially.
One key item to understand is that salaries for lower level positions are typically offered within a range, and the company may not be comfortable with, or able to go outside of, the range. As your career progresses, ranges may become wider. For some executive positions, the salary could be determined more on a one-off basis so it is even more important to know and fight for your worth.
Signing Bonus – A signing bonus is a great way to jumpstart your finances during a job change. They are not just for recent college grads anymore. In fact, more and more companies are using this type of bonus to attract key employees. If you are in an in-demand field or have a unique skillset, you may be able to negotiate an even higher signing bonus (think $50k +!).
Think about what you may be giving up by leaving your current job. A new employer may be willing to compensate you with a signing bonus to make you whole if you’re leaving money on the table at your previous company in the form of stock options or RSUs that never vested.
This kind of bonus is typically paid in a lump sum when you reach a 60 or 90-day milestone at the company. And, unlike salary ranges, employers may have more flexibility here, so it makes sense to ask.
Annual Bonus – The annual bonus is usually offered as an incentive for individual and/or company performance and is paid yearly. But, it’s important to know when the annual bonus cycle is for the employer and understand how yours would be calculated the first year when you may only be there part of the year. You can certainly try and negotiate a guaranteed minimum bonus for the first year, and even for subsequent years. This could be important in companies where it may be difficult to determine criteria/success for individual and company performance.
Compensation that doesn’t show up in your paycheck right away can still be a valuable and lucrative part of your job offer. Often, it’s this part of your package that is the most confusing but can be the most rewarding if made an integral part of your financial plan.
Stock Options or RSUs – many companies offer stock (equity compensation) in one way or another when you get a job offer or a promotion. The value of this offer of stock depends on what kind (different kinds of stock options or RSUs), and whether the company is private or public. Typically, companies like to offer one “flavor” of equity and it’s important to understand which one you are being offered. Also, you should understand whether they are offering equity in lieu of higher salaries to start, or as an incentive to keep employees long-term.
Comparing apples to apples of multiple offers may be difficult, especially between public and private companies. There will also be different tax impacts depending on what type of equity you’re offered.
More stock at a start-up might be exciting, but it’s generally not advisable to fully factor that into your financial plan. Unless the company has a clear exit strategy, be careful on assigning a value to this part of your job offer.
On the other hand, additional stock at a public company could be negotiated and could have a large impact on your ability to meet your financial goals.
One other area you can also consider negotiating – the vesting schedule. A shorter schedule will turn this part of your job offer into cash sooner rather than later.
Deferred Compensation or Special Retirement Plans – While equity compensation is one way to get more money now-ish, deferred compensation or special retirement plans are a way to turn today’s compensation into tomorrow’s money. As you progress in your career, you may be able to consider putting aside more than the max 401k contribution, and these kinds of plans give you an additional way to accomplish this.
It’s important to understand the tax implications of the plan the company is offering. It’s also important to understand the risks of deferring compensation. Planning for your financial future can be more complicated when these benefits are available.
Extra Insurance/ Income Protection – Your needs as an executive should you become disabled or die prematurely are something else you can think about during your negotiation. Some companies may offer increased disability income protection for highly compensated employees, and additional life insurance that may be partially or fully paid/subsidized by the company.
Guaranteed Severance – although some people view negotiating guaranteed severance during a job offer as a negative thing, there’s a reason why people have prenuptial agreements before marriage. If everything goes well, the company will never have to pay it. It doesn’t hurt to ask to have it included in your employment agreement – especially at start-ups or struggling companies.
If you choose to negotiate severance up-front consider thinking about these areas:
- Guaranteed Salary (beyond the customary one or two week’s pay per year of service)
- Payout of partially earned bonus
- Continuation of health or other benefits
- Accelerated vesting of stock compensation and 401k matching contributions
- Outplacement assistance/reimbursement
Finally, it’s time to think outside the box! What are benefits that would allow you to enjoy life more and realize your personal financial and life goals? Here are some more you can consider asking for.
Extra Vacation – far from being taboo, extra vacation will allow you to perform at your peak and strengthen your family life. Some companies offer paid sabbaticals or unlimited vacation.
Flexible Work Schedule/Location – companies are realizing that flexible work schedules and locations allow them to tap into a deeper pool of talent. Although executive and higher level management positions may require travel and in-person meetings, there’s no reason you should have to be tied to your office desk the rest of the time.
Wardrobe Allowance – if the job requires you to be well-dressed, ask for a wardrobe allowance!
Company Car – consider asking for an executive lease. This is a great way to maintain the company image, allow you to drive a nice car, and improve your personal financial situation at the same time.
Club Membership – does the company expect you to entertain? Consider asking for a club membership. If you enjoy golf or club amenities, this will get you enjoyment and save your discretionary income.
Financial, Tax and Legal Counseling – finally, if all these benefits seem complicated (as if life and finances aren’t already complicated enough!), consider asking for the company to help you pay for financial, tax, and legal advice. You want to make sure you understand all of the implications and responsibilities of your benefits and protect your future.
You don’t get what you don’t ask for. Even if you are satisfied with the offer, stretch yourself and ask for more. Companies are expecting you to negotiate. You may not get everything you ask for, so understand what’s important to you, and what you can let go. Take advantage of this opportunity to make your best decision and increase your ability to build real wealth.
Need help evaluating job offers or understanding the implications of your benefits? We can help you make a real plan for your career and your money.
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