Career Advice -- Employment Offers and Salary Negotiation

Are You Really Ready To Negotiate?

Remember that you are not in a position to negotiate money (and/or any of the other attachments) until after the "sale" is made. So the information in this Section should only be utilized if you are truly ready for salary negotiations.

How do you know when you are ready to negotiate? You are ready to negotiate when you have a "ready buyer." You are ready to negotiate when you hear anything from "We are ready to make the offer," to the formal letter offering you the job. Until that point in time, you are not ready to negotiate the "whats" of the offer. Until then, you are only negotiating the "ifs" of the offer. It is always the best negotiating posture to wait until you have the actual job offer in hand. In writing, if possible. Get the offer first, then begin your negotiation.

Assuming that you have steadfastly put forth your "I am ready to consider your very best offer" response when the employer showed true interest at the end of the interviewing process, this should lead to the best possible initial offer from the company. I say "initial" because it is exactly that. Very few companies have offers that are "cut in stone"--even those that say they do often give in to many of the "perks" that are requested.

Outstanding Questions

No, I am not referring to questions that are considered to be wonderful. I am referring to questions that are still outstanding, questions not yet fully answered. If these questions still exist when the offer is made, you have two choices: ask them at the same time the offer is made (best choice) or add them to your list of potential concessions you request when you accept (see below under Acceptable Offer Negotiation). You should always be ready for the offer to come through--at any time, under any circumstances. If you are not ready in advance, you will miss the opportunity to ask some "free" negotiating questions that can give you additional career commitments above and beyond what has already been given. These questions are invaluable since they cost you virtually nothing from a negotiating standpoint.

So if you are on your toes when the offer is made, you can ask these key questions (if yet unasked in the interview process) at little or no risk:

• "What are the promotional opportunities of the position?"

• "To what position/level?"

• "How and when will my performance be reviewed?"

• "Will this include a salary review?"

• "What kind of salary progression would be expected in the first three to five years?"

Be sure to take careful notes of the answers and who gave them. These may be the most "liberal" responses you ever hear with regard to your position. Don't be afraid to refer to these promises and guarantees later when they become important in your work. But realize that they are not true job offer negotiations. They are "gifts" given to you at the time of your job offer, possibly never to be uttered again. Take careful notes.

Job Offer Negotiation

If you have a true job offer in hand, the first thing you need to do is decide whether the offer is acceptable to you in its present form. In other words, if this is the very best you can negotiate, will you still accept the job? If not, you will need to take a different tack.

In either case, it is always important to know who is pulling the strings. It is usually the hiring manager, but not always. Hiring authorization may actually come from a level above the hiring manager. There may even be input from a Salary Administrator in Human Resources, although they are usually there for input, not for absolutes. The key is to know who makes the decisions. If you don't know, ask. Ask the hiring manager, the person you will be working for. Remember, it is always in their best interest to make this happen. Now that they have made you an offer, you have one foot in the door to their company. You have access to information that you didn't have prior to the offer.

Evaluating The Total Package

While salary is certainly the most important element of a job offer, it is by no means the only point of consideration. The total package includes all of the benefits and other "perks" that are provided to you as an employee of the company. One of the biggest errors that many college grads make in evaluating an offer is to look exclusively at salary as the measure of acceptability. Benefits seem to be an ethereal element that will never actually be used. The Invincibility Factor ("I'll never be sick, disabled, die, or need to get my teeth cleaned") runs high among most new grads. If you have not been provided a formal benefits package to review by the time the job offer is made, ask that it be sent to you. If you are given the information verbally, take copious notes and ask clarifying questions on any areas you do not understand.

Evaluating Your Benefits Package

Benefits are not just for the twilight of your career. While we typically think of benefits as basic insurance coverage, a good benefits plan can include many additional perks that offer true tangible gains in relation to the competition. Following are some of the basic elements of benefit plans and what to look for:

• General Coverage
  Find out if there are any monthly or per-pay-period costs for the overall benefits plan (which will make an immediate and tangible dent in your take-home pay), who is covered (does it only cover you or does it also cover other family members and future family members), when each component of the benefit actually begins (some will begin the first day of work, some after 30 days, and some after one year of employment), and whether any of the benefits are taxable (life insurance is an example of a benefit that you can end up paying taxes on at the end of the year). If the benefits are provided cafeteria-style (where you can pick and choose which you will enroll in), find out if you can add additional benefits at a later date and what restrictions would be involved.

• Medical Insurance
  Consider the type of plan (Preferred Provider Option, Health Maintenance Organization, Blue Cross/Blue Shield, etc.), what expenses are covered (HMOs will often pay for preventive care expenses that others will not, etc.), deductibles (annual deductibles, per office visit deductibles, etc.), co-pays (percentage the company pays versus the percentage you will pay), exclusions for pre-existing conditions, and whether or not the plan has open enrollment (including any medical exams or other evaluations that may be necessary for enrollment in the plan).

• Dental Insurance
  Consider whether preventive care (exams, cleaning, X-rays, etc.), surgical care (root canals, etc.), and orthodontic care (braces, etc.) are covered and to what extent (deductibles, co-pay, annual, and lifetime maximums).

• Optical/Eye Care Insurance
  A great benefit if you need it. A great benefit even if you don't currently need it (most of us need it eventually). Evaluate what expenses are covered, what the deductibles are, and what the annual and lifetime maximums are. Many companies now offer an "up to" amount of coverage that can include exams, eyeglasses, contact lenses, and even disposable lenses.

• Life Insurance
  Although you are likely not planning your funeral arrangements yet, this benefit will become increasingly important as you add loved ones to your life. In the meantime, it may cover the basic expenses in the event of unexpected tragedy. Some companies will also provide you with the opportunity to purchase additional blocks of term insurance, frequently at or above the going market rate. It is usually better to purchase additional insurance separately, but evaluate the costs--especially if the rates offered are stable for the duration of your employment.

• Accidental Death Insurance
  As if it somehow matters how you die, some companies pay more if your death is of a more spectacular nature. If they offer it for free, take it. Don't buy additional amounts.

• Business Travel Insurance
  Another variation on the accident insurance theme. Companies sometimes provide insurance to cover accidental death or dismemberment while traveling on business. Again, if they offer it for free, take it.

• Disability Insurance
  One of those benefits that you will never ever care about until you really need it. Disability insurance is usually divided into short-term disability (which can sometimes include an allocation for sick pay) and long-term disability (which usually kicks in after six months to a year). Note the percentage amount, how that percentage may change over time, and what that percentage is based on.

• Vacation
  Consider how many days are allowed in your first year, when they begin accumulating, when they may be used (can days be taken before they are earned?), how many days are allowed in future years, and the maximum number of days. Most companies provide two weeks (prorated from the hire date) during the first year and one additional day per year of service thereafter, with a maximum of four weeks vacation. Some companies, however, do not provide any vacation during the first year. Note also whether vacation days accumulate according to the calendar year or work year (based on your date of hire).

• Holidays
  There are six standard holidays that nearly every US company covers (New Years Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day). In addition, most cover the day after Thanksgiving, and some cover additional days, such as Presidents' Day and Martin Luther King Day (and then there is the U.S. government, which is a member of the Holiday-Of-The-Month Club). Many companies will offer six or more "set" holidays plus one or more "floating" holidays that can be used at the employee's discretion. In this case, these floating holidays usually end up being treated much the same as vacation days. If the company offers floaters and you are starting midyear, note how many will be offered to you during the first year.

• Sick/Personal Days
  While most companies have moved away from having formal sick days for salaried staff (which encourages slacker employees to take them in spite of lack of actual illness, since they are already enumerated), some companies will also provide for a certain amount of personal days. Again, these can be thought of as pseudo-vacation days. But remember that when you take time off work to visit your sick Aunt Martha in Idaho, it will likely be applied against this time allocation.

• 401(k) Plans
  Your company's 401(k) plan can help you begin building a tax-deferred retirement nest egg early (start now and you will really be able to enjoy your retirement). Consider the amount of company matching (if any), and the maximum amount of matching and employee contributions. Also check the amount of time it takes to vest the company matching amount and whether there is a partial vesting during the interim.

• Pension Plans
  The ultimate yawner benefit for 22-year-olds, these can and will make a difference to you later in life. Usually the company puts an amount into an account that silently accumulates for you over time. An excellent benefit that many companies (unfortunately) are cutting back on. he one you are being offered. Forget any promises that it will likely be greater in the coming year(s). Even when you are dealing with historical figures, don't plan to spend the money until you have the check in hand. Anything can and will happen with the profit sharing wild card, even with the most conservative companies.

• Stock Options/ESOPs
  Once the domain of executive management, stock options have recently been filtering down into the rank-and-file of companies through ESOPs, or Employee Stock Ownership Plans. While different from true stock options (you usually have to buy the stock at regular intervals at the prevailing market price), it gives the advantage of buying company stock at a discount from market value. While the discount varies, it usually is in the 10 to 15% range, which means that you make an immediate 11 to 17% profit (since you are buying at a discount).
     
  The stock purchase is often free of any broker commissions or fees. Some companies will allow you to sell the stock commission-free through their investment banking firm. Most will also allow you to reinvest your dividends commission-free to buy more stock. It is an outstanding benefit and you should immediately sign up for the maximum allowable (usually 5 to 10% of your base salary). Unless you have little faith in your company's financial performance (in which case you should ask yourself why you are working there in the first place), let the money grow as your career and employer continue to grow.

• Tuition Reimbursement
  An especially important perk if you plan to pursue an advanced degree in your evening and/or weekend hours. Consider what types of course work are covered, the tax impact of the benefit (the IRS usually will only consider the benefit tax-free if you are studying within your current field), how the benefit is paid (some companies pay 100% for an "A," 75% for a "B," etc.), and the yearly maximum.

• Dependent Care
  As companies adjust to the workforce of this decade and beyond, they are examining the role of providing dependent care for their employees. This can include providing on-site child care facilities or allocating specified amounts for child care and elder care. Some companies, while not paying directly for these costs, will offer programs for allocating funds for these expenses from pretax funds. Although this benefit may not mean much to you now, probably one of the very best benefits to have is the ability to drop off your kid(s) next door to work in the morning, have lunch with them, and take them home with you in the evening--the parent of the '90s.

• Employee Assistance Programs
  Some companies have a formal program designed to aid employees in need of assistance. While this can sometimes be for mainstream needs (such as financial planning and tax assistance), it can also include drug/alcohol counseling and other types of crisis support. Just one more way to let you know that you are not on your own when you are in need of help.

• Overtime/Travel Premiums/Comp Time
  While salaried employees are usually not paid overtime, some companies will compensate for time above and beyond an expected standard (about 40 hours per week). This can take the form of overtime or bonus pay, a premium above and beyond standard pay for hours worked at out-of-town locations, and/or comp time (which converts extra hours worked into extra time off).

• Parking Reimbursement
  This often overlooked perk can amount to a great deal over time, especially if you will be working in one of the high cost parking (and living) cities such as New York, Chicago, or Los Angeles. This $50-100/month coverage can easily amount to $1000-2000/year in salary equivalence.

• Commuting Cost Reimbursement
  While few companies will pay you for the commute to and from the office, some companies in high traffic/smog congestion areas will provide either company van service, a car pooling allowance, or commuter train/bus allocations to encourage their employees to use environmentally-friendly means of transportation.

• Expense Reimbursement
  Almost all companies will pay you for direct business-related costs that you incur. However, how that cost is calculated often differs, with you picking up the difference. For example, using your car for business travel (above and beyond your standard commute) might be covered at anywhere from six cents to thirty cents per mile. That ends up being quite a difference if you are racking up the miles. Also, items such as business entertainment may only be reimbursed up to 80%. So if your job requires incurring business expenses, know what will be covered and to what extent.