How to Negotiate Salary and Improve Employee Compensation Conversations

Whether you’re a job candidate negotiating a salary or a manager being asked for a raise, talking about compensation can feel uncomfortable. But avoiding the subject and not negotiating salary means maintaining or increasing pay gaps and potentially unhappy employees.

Transparent employee compensation can help close racial and gender pay gaps and increase productivity and employee satisfaction. Having respectful, tactful, and productive salary conversations shouldn’t feel impossible. With the right preparation and talking points, salary negotiation can be easy. And once you’ve aligned on employee compensation, you can easily streamline your compensation processes with BambooHR.

Why Is Pay Transparency Important?

Pay transparency is openly communicating salary information with current employees and job candidates. And more transparency can lead to greater equity and employee empowerment. But while pay transparency is becoming increasingly common, talking about pay still seems uncomfortable for many.

A survey found that 79% of employees want some form of salary transparency. Yet according to one study, 63% of people have never asked a coworker about their pay. And another found that 68% of employees avoid compensation discussions at work entirely.

Pay transparency can be interpreted differently across organizations. At Whole Foods, staff members can look up any employee’s salary and bonuses—even the CEO’s—from the previous year. San Francisco-based tech company Buffer takes pay transparency to the next level by making all employee salaries available online for anyone.

The risk of finding out you’re being paid less than your peers might be enough to scare you away from asking in the first place. But knowing what others in your industry are making can help you feel more confident you’re being paid appropriately or help encourage you to ask for more.

HR’s Role in Salary Negotiation

In addition to company transparency, HR teams can be a part of the solution to making compensation conversations more comfortable. They can play a vital part in preparing employees and managers for salary negotiations by helping set ground rules for these conversations and ensuring managers have the resources needed to conduct them.

3 Ways to Determine Employee Compensation

Employee compensation is generally skill-based, competency-based, or performance-based. Your organization will need to establish which system is right for you:

1. Skill-based pay: Generally used in jobs that provide a career path based on increasing technical skills rather than moving up the management ladder. These skills are measured by assessments and certifications.
2. Competency-based pay: Based on an employee’s skill set, knowledge, and experience rather than their job title or seniority. This encourages employees to contribute to the company by improving their skills.
3. Performance-based pay: Determined by how well an individual, team, or entire company performs. This is often used in association with sales or for determining bonuses.

Frequency of Employee Compensation Reviews

Your organization should have an established schedule for evaluating employees’ compensation. Many companies conduct annual performance reviews to ensure employees’ salaries reflect current market value and their growth and development over the year.

Depending on your industry, it may feel appropriate to conduct salary reviews more or less frequently. But employee anniversaries are a great place to start and an easy way to stagger salary adjustments throughout the year. Employees also shouldn’t be restricted from asking managers about raises whenever they feel appropriate.

Prepare Employees for Compensation Conversations

Once you’ve established how often managers should discuss salary with employees, you need to ensure they have the tools and skills to conduct these conversations.

Many companies prepare managers using comprehensive training and by role-playing various scenarios. This helps managers understand what’s appropriate to discuss during compensation conversations, how to prevent contentious situations, and whether a conversation needs to include HR.

7 Salary Negotiation Tips for Job Seekers and Employees

There’s no need to be nervous walking into a salary conversation.

John Meese, Creative Director at BambooHR (and manager to 12 employees), advises: “Don’t be afraid to have the conversation. Money is one of the most important parts of a job. We’re asking you for your work and paying for your work. It should be one of the most clearly discussed things. Your employer is clear about your job description, and you should be clear on how you’re compensated.”

The number one rule for any conversation surrounding compensation as an employee is to be prepared. Whether you’re negotiating salary, asking for a raise, or discussing a bonus, you need to walk into the conversation prepared to clearly state what you’re asking for and why you think you deserve it.

3 Salary Negotiation Best Practices

For job seekers, you’ll likely be asked about your desired salary at some point in an interview process. Don’t be caught off guard when your interviewer asks.

Indeed outlines three ways to help you prepare for compensation conversations:

Know Your Worth

It can be hard to know your market value if you’re changing cities, positions, or careers for a new job. Salary calculators on sites like Glassdoor and Payscale use short surveys to find a general range for how much others with your experience, in your area, and in a similar position are making. This range should give a good baseline of where to set your salary request.

Give a Range

Rather than give a specific number, you can provide a salary range for the employer to consider. Once they return with a specific number, you can negotiate salary. During salary negotiations, cite specific market research and evidence of your skills that support your claim on fair pay for the position.

Take Your Time

If you’re asked about salary expectations before you’re ready to answer, it’s okay to ask for more time if you don’t think you know enough about the position or organization. Explain that you’re looking for a competitive offer, but need to understand the position better. But you only get one “get out of jail free” card. If you’re asked about salary expectations again, you’ll need to answer to the best of your ability.

Bonus: Ask Questions

You may have an idea of how much you’ll be paid. But do you know when you’ll be paid or in what form? And compensation isn’t just your salary. Will you get benefits, bonuses, or equity in the company in addition to your paycheck? Be sure to ask questions during the interview or negotiation phase so you know what to expect as an employee.

4 Raise Negotiation Best Practices

You hold a few more cards when interviewing for jobs than you do as an employee seeking a higher salary, so you may have to be a bit more conservative when asking for a raise.

However, that doesn’t mean you shouldn’t ask for what you deserve. You should have a clear reason why you deserve a raise. Some points you may want to include are:

• My responsibilities and/or skill levels have increased since we last discussed my pay.
• Others at the organization are doing the same work and being compensated more.
• Others in my industry are being compensated more.

Dive In

Set expectations upfront with your manager that you’re requesting a meeting to discuss your salary and dive in with your prepared points. Beating around the bush or burying the compensation question inside another conversation can leave you and your manager confused and dissatisfied with the discussion.

Choose Your Timing Carefully

You can ask for a raise at any time, not just during your annual or quarterly performance review. If you just nailed a huge presentation or delivered particularly stellar results, it’s time to make your move. But if you recently flopped a big project or turned in multiple assignments late, it’s probably not the best time to ask for a raise. Choose the time that feels most appropriate for you.

Be Specific

“Come prepared with what you’re asking for,” says Meese. “Don’t come with a general ‘I need more.’ You have to make your case. The case is a combination of, ‘This is the work I’m doing for us, this is some of my past performance, and these are some of the projects I’ve done.’”

Focus on accomplishments you’ve achieved, skills you’ve acquired since your last salary adjustment, and ways you’ve impacted the company. Unfortunately, personal reasons aren’t appropriate causes to ask for a raise.

Prepare a Response

Even if you show up with evidence and confidence, you still might not get the raise. If that’s the case, will you accept it and move on? Will you start looking for employment elsewhere? Whatever you do, be prepared to ask your managers some questions like:

• What do I need to do to earn the salary I desire?
• Can we review my salary again in six months or a year?
• Are my career goals possible at this company?
• Is a one-time bonus more realistic than a raise?

“No matter what you do from an employee perspective, if your request is turned down or accepted, stay humble about it,” says Meese. “Always be gracious to maintain the best relationship.”

Maintaining a positive professional relationship is important, no matter the results of the conversation. That means you shouldn’t storm out if you don’t get what you want and should remember to show appreciation if you do.

4 Salary Negotiation Tips for Managers

Any good manager should be trained to have productive, clear money conversations with their employees. Managers need to prepare talking points when entering a salary negotiation just like employees should.

Give Context

It doesn’t matter if you’re offering a raise, accepting someone’s request for a raise, or denying a request; you need to give your employee detailed information to back up your decision. When employees are disappointed by a response, it’s usually because they don’t know or understand the context of the decision. Be clear about how decisions are made regarding promotions, raises, and bonuses, and don’t over- or under-promise on any expectations to your employees.

Ask Questions

Your employees probably have big career goals—do you know what they are? You can’t do much to help them if you don’t. Even if you can’t offer employees the raise they’re looking for right now, you can help map out their career trajectory at your organization. This will help them know when to expect a raise or bonus, what opportunities are available, and how they can meet the skill and performance requirements for those goals.

Check In

Don’t let one conversation be the end of your discussion. If an employee got a raise, ask them if it’s reflected in their paycheck to ensure the changes were made correctly. If you decided against granting a raise for now or made a different compensation plan, make sure they feel like a valuable part of your organization and that their work is appreciated.

Follow the Golden Rule

Everyone has a boss, so treat your employees with the same respect you want to receive when you discuss compensation with your own manager.

Handle Your Next Salary Negotiation with Confidence

Talking about money doesn’t need to be scary. Hopefully, whether you’re a manager, employee, or job seeker, you’ll feel more at ease during compensation conversations with the help of these tips. If you do your research and are prepared, you should have the confidence you need to have a constructive and respectful conversation, whatever the result.