Why Failing to Negotiate Your Salary Can Be a Major Mistake

The First Step of a Successful Salary Negotiation


A salary negotiation can be intimidating, especially if it’s one of your first. Should you even negotiate? Will they be turned off if I try for a higher salary? How do I start that conversation?

All valid questions to be asking yourself.

It can be easy to let the nerves or uncertainty of those questions pass you by and simply accept what’s on the table. Or, you’re simply just excited that you’ve landed this job and what they’ve offered you. Hey, it’s only your first or second job out of school, what is there to lose, right? Wrong.

You shouldn’t immediately discount your opportunity to negotiate your salary the first time, or ever, because it can affect your future salary for years to come. Now, if you didn’t negotiate your first chance have no fear because it’s just all the more reason to make sure you do in the future.

But, whether you’re approaching your first salary negotiation or another opportunity will present itself in the future,  it’s important to start thinking about your value. And how you’re being compensated in exchange for your time, experience and skills early on in your career.

So, let’s break it down. Why is your first salary negotiation so important? Or, any of them in your career for that matter?

Your current salary plays a role in what you’ll be offered in the future.

That’s right, what you’re making now could have a significant impact on what you could make in the future. How come? Because more often than not an employer is going to base your pay bump, raise or next job offer on what you’re making at the time.  

When you’re at a company that you enjoy and one you see yourself growing at, there are two standard instances in which you could expect to receive an increase in pay (outside of you directly asking for a raise): an annual merit increase as part of the performance review cycle or a raise in conjunction with a promotion.

Both of these opportunities for a salary increase are based on the foundation of your starting salary.

[Related: Are You Getting Paid Enough? 5 Signs You Might Not Be]

When it comes to an annual merit increase, it is a structured, performance review-based means for the company to give you a salary increase.

While you shouldn’t discount the standard merit increase cycle many companies have instilled. It’s good to approach it at face value. They’re designed by the company at their advantage to be systematic and allow them to give a small pay bump across the entire organization.

On average you can expect a 2 - 5% percent increase based on how your performance was rated for the raise. You can expect the high end if you’re designated in the high performing category of employees, an ‘exceptional’ rating will usually earn you that 5% increase.

So for example, if your annual salary is 40,000 with an average 3% annual merit increase in one year you’ll see an extra $1,200 in the year ahead. Now let’s pretend you negotiated your salary to $45,000 your 3% annual merit increase would add up to $1,350.

Now, an extra $150 might not seem like much. But over time it adds up and also adds to your salary base that future increases and raises will be based on.

Why You Need to Negotiate Your Salary

The same principle applies to a deliberate raise in your salary.

Fast forward to a promotion. On average you can expect a 7 - 12% raise for a job change up the ladder. So if we apply that to a $40,000  salary and a 9% raise you would be making $3,600 more a year. With a $45,000 salary at the same rate that would mean a bump in pay of $4,500.

See what are we getting at? Without taking time to negotiate you’re not only leaving money on the table at the time, but for the future. Because normally in the world of pay raises it’s not based on a lump sum, it’s based on a percentage of what you’re already making.

If you make a job change, your current salary may still come into play too.

You’ll come to find that if you are looking for a new job recruiters will ask you what you’re making. There are even online applications now that require it as an entry if you want to complete it. Annoying, we know. Simply put, it’s not a part of the conversation you can always avoid.

They want to talk turkey and have an idea if you and the prospective company are aligned on what they can and are willing to offer you, and in turn what you’re looking for.

So, guess what? Whether you divulge what you’re making exactly, or give them range, they’re more than likely going to take that into account when making you an offer.

It all comes down to knowing your worth.

When we look at each of these scenarios, all of which you’ll likely encounter at least once in your career, your salary is directly tied to your future compensation. Which is why you should seize each chance you have to negotiate and know our worth in the workplace.

And, that’s the first step in a successful salary negotiation, knowing what you bring to the table. You can grab our Know Your Worth Workbook to help get you started, giving you the lowdown on my favorite tools to help you begin determining what you should be asking for.  

How do you feel when it comes to negotiating your salary?

A version of this article was originally posted on The Sophisticated Gal