After a successful job interview, the time comes for the candidate to enter into the salary negotiation phase of their journey. The well-prepared candidate already has taken steps to prepare:
- Researching a reasonable salary range for the position using transition assistance resources at their local military installation and by reviewing earnings data on salary comparison websites like Salary.com, PayScale, and Glassdoor.
- Checking the Bureau of Labor Statistics website (www.bls.gov) for state-specific salary information -- much like the role of the Basic Allowance for Housing in military pay, location is a major component in civilian salaries.
- Engaged their network to get insight into role, company, and industry salary benchmarks based on people who are actually in the business.
The savvy jobseeker strives to be prepared for the salary discussion since one can never be sure when it might come up. Armed with research, they have a general salary range appropriate to the target position. More often than not, however, job seekers automatically see themselves at the top of the salary range. While this might initially seem like a smart move, there actually can be some downsides.
Salary Range 101
Why do companies use salary ranges? They want consistency and the ability to both anticipate and control their operating costs, of which employee salaries are a huge part (over 50% in many industries). Employers set the top and bottom of these ranges based on the compensation they determine employees performing the same or similar functions should receive. Ideally, having a salary range (vice a fixed number) provides an opportunity for employees to receive additional compensation without a promotion. Salary ranges also offer hiring managers the latitude to recognize candidates whose qualifications and experience deviate from the norm.
How do employers determine the salary range? There are several factors:
- The required skills, experience, knowledge, and education of employees in a given position.
- The going market rate for the type of work, based on the location or region.
- How many other people are available to perform the work.
Employers often use salary surveys to determine the average or median compensation for a particular job or role. The surveys are compiled by industry associations, companies who specialize in salary surveys, or by the employers themselves. Having good insight into salary market data allows a company to attract and retain talent, and compete with other companies.
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Where Do You Want to Be?
There are obvious advantages to being at the top of the salary range: You’re maximizing your salary potential (since all future raises build from your initial base), you’re being recognized for the value you bring to your employer, and you’re showing some negotiation prowess – a skill that will help you represent the company’s interests. However, while the lure of a fat paycheck is difficult to resist, there are a few downsides to starting a new job at the top of the salary range:
- End of the Road. Once you are at the top of the range for your position, you’ve hit the cap for salary growth. You will no longer receive increases to your base salary (beyond inflation adjustments), regardless of the quality or quantity of your performance. The company may periodically make necessary adjustments to keep the range within market rates, but expect those to be few and far between.
- Time to Go? Getting more salary beyond the maximum cap means a move within the company to a position with higher compensation range, or leaving the new company altogether. Lack of opportunity for promotion or growth is a common reason cited by many people who decide to leave their jobs.
- An Awkward Spot. If your employer knows you’ll need to change positions to secure a meaningful raise, the company may see you as a flight risk -- someone who can be tempted to jump to a competitor for more money. Most employers will be uncomfortable with the situation, knowing they have no wiggle room.
- A Fast Transition. “To whom much is given, much is expected.” Studies show it can take six months (or more) before a new employee is sufficiently up to speed to contribute to the bottom line. If you are at the top of the salary band, expect a shorter honeymoon period due to heightened expectations.
The best outcome of the salary negotiation process is one that represents a win-win for both sides. If you find yourself pursuing a position where your skills and experience immediately put you at the top of the salary range, you might be targeting the wrong employer; it may literally pay to extend your search a bit further. A recruiter once shared that his goal is to place candidates at about the 60% point of the salary range – a deliberate approach he takes to allow room for growth in future earnings.
Lastly, as you navigate this process it can be helpful to keep the full arc of your career in mind. The salary you negotiate is your starting salary, and you should generally expect to receive a cost-of-living adjustment of about 2% to 3% each year. Moreover, annual bonus potential varies widely by company and industry and is generally driven by individual performance, group performance, and company performance.
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