salary negotiation

The Secret to a Higher Salary: Ask for Nothing?

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An interesting experience by Brooke Allen on negotiating the highest salary (in his mind) by asking for nothing at all (literally, $0):

The next time I had to negotiate a contract, it began in typical fashion with a prospective employer sending me a lopsided agreement and asking me to counter-propose. I said I was incompetent to do that and suggested they write a new contract as if they were me, putting in everything that would be in my best interests, and then taking out everything they would never agree to. Since that would be the best I could get, I would accept it subject to agreement on compensation.

We started with base pay. I wrote down the least I would work for and asked them to write down the most they would offer a perfect person, irrespective of whether I was that person or not. If when we exchanged papers, their number wasn’t higher than mine then we could stop there and save time. Their number was twice the best base pay I had ever received in past jobs, and my request was for $0. I explained that my goal is to live a debt-free life, and therefore I wanted to give value before receiving compensation.

We did the same thing with profit sharing percentages. However, this time I wanted the highest payout standard for our industry, which happened to match their number. We agreed on that percentage because it maximized my incentive to perform and minimize the risk I would ever want to go elsewhere. (As it turned out, because human resources wouldn’t put me on the books without paying me something, I ended up getting a better deal than the best I would have ever asked for.)

I’m all about the win-win, but I have doubts about the employer playing a game where they write their number down, you write your number down, and then perform a bilateral exchange. This process takes days or even weeks, not minutes as implied by Allen’s post.

On Salary Negotiation

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Patrick McKenzie, an ex-Japanese salaryman and founder of Kalzumeus Software, has one of the best posts I’ve ever read on salary negotiation. If you’re hunting for a job (and even if you aren’t), the post is worth twenty minutes of your time.

One highlight is this affirmation that you shouldn’t name your price/salary point first:

Every handbook on negotiation and every blog post will tell you not to give a number first.  This advice is almost always right.  It is so right, you have to construct crazy hypotheticals to find edge cases where it would not be right.

For example, if your previous salary was set during the dot-com bubble and you are negotiating after the bubble popped, you might mention it to anchor your price higher such that the step down will be less severe than it would be if you engaged in free negotiations unencumbered by the bubbilicious history.  Does this sound vaguely disreputable to you?  Good.  This vaguely disreputable abuse of history is what every employer asking for salary history, salary range, or desired salary is doing.  They are all using your previous anomalously low salary — a salary which did not reflect your true market worth, because you were young or inexperienced or unskilled at negotiation or working at a different firm or in another line of work entirely — to justify paying you an anomalously low salary in the future.

This is a superb reminder about employers’ full-load costs:

First, get into the habit of seeing employees like employers see them: in terms of fully-loaded costs.  To hire someone you need to pay for their salary, true, but you also have taxes, a benefits package, employer contributions to retirement, healthcare, that free soda your HR department loves mentioning in the job ads, and what have you.  (Trivia: for a US employer of professionals, the largest component after salary is usually healthcare, followed by payroll taxes.)  The fully-loaded costs of employees are much higher than their salary: exactly how much higher depends on your locality’s laws, your benefits package, and a bunch of other HR administrivia, but a reasonable guesstimate is between 150% and 200% of their salary.

Read the rest on Patrick’s blog.