Getting your first full-time job offer is pretty exciting–so exciting, that you might accept before negotiating! But don’t make this rookie mistake—it could cost you a lot in potential earnings over the course of your career. Here’s more on why you should always negotiate your first salary, and tips to help you negotiate with confidence.
Tip: If you didn’t negotiate your first salary, all hope is not lost. There are ways to course correct! Read this blog on how to negotiate a raise.
Let’s crunch some numbers
Your first salary negotiation can be intimidating—but it’s worth pushing through the fear. Pay increases are usually calculated as a percentage of your income. So if you don’t negotiate now, every raise you get, every bonus you receive, and even the number of stock options you are awarded will be smaller.
Need some numbers to convince you? Let’s say you’re offered a starting salary of $35,000, but you negotiate and are able to increase it to $42,000. The average annual raise for professionals is around 3-5%. For simplicity’s sake, we’ll assume that’s the only pay increase you get each year. After 10 years, you’ll be making about $54,800 per year.
Now let’s say you don’t negotiate, and accept the lower starting salary of $35,000. After that same 10 years, you’ll be making about $45,700. What was once a $7,000 gap is now around $9,000 per year—or about $80,000 more in your bank account over the course of that decade.
The numbers don’t lie: Failing to negotiate on a starting salary is a mistake that will compound as the years go by.
How to negotiate starting salary
Salary negotiations don’t need to be difficult or drawn out. The best way to put yourself in a solid position to make a deal is to come to negotiations prepared.
Research the job market
You know the job you’re applying for, and might have an idea of what the job market is like in your area in your field. You can use this information to do some in-depth Googling to learn more about similar roles, and the salary range they fall into for people with your level of experience and education.
Depending on your role, you might be able to find comparable salaries at your company through sites like Salary.com or Glassdoor.com. Be careful though, the data on these sites isn’t verified and it’s self-reported, so the accuracy can be questionable.
The Bureau of Labor Statistics’ data is verified, so it can be a great resource as well for salary data research.
Ask about the company’s compensation philosophy
For even more accurate and actionable data to use in your salary negotiation, you’ll want to go straight to the source: The company you’re applying to. See if they’ll tell you about their compensation philosophy and how they determine starting salaries.
A compensation philosophy is a company’s position on compensation. It explains the ‘why’ behind compensation strategy and decisions and should create a framework for consistency related to compensation practices.
Before you start negotiating your starting salary, you’ll want to know how your company aims to position itself to the market in terms of pay competitiveness:
- Does the company want to pay more (lead the market) than most companies? Does it want to pay less (lag the market) than most companies?
- Does it want to pay on average of what other companies pay?
The answers to these questions will impact how pay is set, relative to the market, at the company you’re applying to. This will help you understand how much room you have to negotiate.
Get to know the company
When you’re applying for an entry-level role, you aren’t going to be expected to have decades of experience. However, you will be expected to learn quickly. You’ll make a much stronger argument for why you deserve a higher salary offer if you can prove that you know and care about the company you’re interviewing with—and that you’re ready to learn.
Check out the company’s website and social media profiles to get a sense of what they value as a company, and who’s who within the organization. If the company is active on LinkedIn, that can be a helpful research tool too.
If you know someone at the company other than your hiring manager (or you see that you have a mutual connection on LinkedIn!), see if you can grab coffee and ask them more about their experience working at the company. They might be able to provide helpful tips about the specific hiring practices of your company, and what they value in potential hires.
Prepare thoughtful questions
Come prepared with a list of questions to show that you’re genuinely interested in the company and role you’re applying for: What’s a day in the life like of the role you’re applying for? Are there opportunities for professional development in this role? That picture of ‘ice cream Friday’ that you saw on the company’s Instagram–is that a weekly thing?
Prove that you’re willing to do your homework and learn quickly by researching the role and company well.
Own your experiences
One of the toughest parts about negotiating your first job is that you might not have many years of professional experience. But that doesn’t mean you haven’t had valuable experiences that make you worth a higher salary!
Be ready to highlight the unique abilities you bring to the table—the ones that got you the job offer in the first place. A job description should be posted when you apply for the role, so look for opportunities to showcase how your experience has prepared you to meet the job’s responsibilities.
Come prepared with specific examples that demonstrate how you’ve already done the main responsibilities of the job elsewhere, or how you’ve gone above and beyond the minimum expectations or duties of the job. If you don’t have previous job experience to draw examples from, look to different types of experience - it could be schooling, volunteer work, or even examples from personal experiences. Make sure your examples clearly illustrate how you’re qualified for the position.
For more practical advice for negotiating your salary, check out our guide to negotiating your salary here.
Don’t leave money on the table!
Showing up armed with facts can have a major payoff for job seekers, and especially for those getting into their first post-collegiate careers. Understanding and valuing your skill set—and having the confidence to ask for what you’re worth—can put you on the path to a more lucrative career and possibly even an earlier retirement.
According to personal finance expert Ramit Sethi, even a $5,000 higher starting salary can be worth $1 million over time, once factors like increased retirement, bonuses, and investment contributions are added in. So if you’re getting ready to take your first full-time job, don’t forget to negotiate!
Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor our partner bank, BBVA USA, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.