Here’s How Much Money You’re Leaving On The Table By Not Negotiating Your Salary
Job offers are exciting. Whether you’re a recent graduate getting your first job or 30 years old and becoming a manager, it’s easy to want to accept that job on the spot. But before you do, remember that it’s important to take the time to review the offer — and decide what to negotiate.
Yes, negotiating is nerve-wracking, but it’s necessary these days. That extra cash in your paycheck could help you pay off your student loans faster or save more for your dream home. Plus, not making that extra money could seriously set you back from retiring like a rockstar in the future.
So starting a job at $40,000 instead of $45,000 might not sound like a big deal, but that $5,000 difference could set you back millions in your lifetime. Linda Babcock, an economics professor at Carnegie Mellon University ‘s Heinz College, told NPR that by not negotiating your salary at the beginning of your career, you’re potentially leaving $1 to $1.5 million in earnings on the table.
That’s a lot of money. And if you’re a woman working full time, you’re already making only 80.5 cents for every $1 that men earn. Ugh. That’s all the more reason to push for a higher paycheck.
If you’re still thinking that there’s no need to negotiate your salary, consider this.
According to Mercer’s 2018/2019 U.S. Compensation Planning Survey, high-performing workers could get an average annual raise of 3.7 to 4.7 percent. Let’s say there are two high-performing workers. Alex started at an annual salary of $40,000 and Jordan negotiated the job offer and started at $45,000. That’s just a $5,000 difference per year.
If both are set to receive the highest salary increase that their company can offer — let’s say 4.7 percent for this example — then Alex will end up making $41,880, while Jordan will make $47,115 after one year. With that 4.7-percent salary increase, the gap between the two employees goes from $5,000 per year to $5,235 per year. If Alex and Jordan stay at their company and continue to get 4.7-percent salary increases year over year, that gap will grow wider and wider.
After 10 years, Alex will have an annual salary of $63,318, while Jordan will have an annual salary of $71,233. After 20 years, Alex will be at $100,229 and Jordan will be at $112,758. After 30 years, Alex will be making $158,657, and Jordan will be making $178,490. By year 30, that’s almost a $20,000 difference between their annual salaries.
This is a simple example, but it’s striking how much more Jordan ends up making than Alex after 30 years, all because of a simple salary negotiation.
If you’re not sure how to negotiate, start simple and be polite. Before asking, do your research on what the average salary is for the position in your industry. Glassdoor is a great place to start. Then consider what experience you’re able to bring to the table. Once you have an idea in mind of what you’re looking to make in this new role and the hiring manager has made the offer, ask for what you want in the nicest way possible. Be sure to show them you’re really interested in the job and are committed to joining the team.
Try something like:
Thank you so much for this offer. I’m really excited to join the team and help the company grow. Would it be possible to have a starting salary of [NUMBER] instead? Please let me know. Thank you!
As many professionals have learned over the course of their careers, the worst that a hiring manager can say is no, which might mean that it’s just not in the company’s budget. If there’s no room to budge on the salary, consider all of the other benefits that you could negotiate instead like title or vacation time.
Whatever you do, don’t leave millions of dollars on the table. Negotiate your salary or other job benefits whenever you can throughout your career. Your future self will thank you.
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