How to get the best deal and create a win-win situation for both you and the company at the salary negotiation table
So you are looking for a new job and you have attended several levels of interviews. It will get to the point where the compensation dialogue will begin. What should you and what shouldn't you say? Here is a guide to navigate that tricky terrain and ensure a win-win situation for both you and the organization.
What Can Go Wrong?
A few things can go wrong if this is not properly handled.
1. If you don't negotiate properly you could end up with less than what you were earning before. I'll explain that in more detail later.
2. You could end up earning lower than your colleagues on the same level or job class. That is just demoralising.
3. You could end up earning much higher than your colleagues on the same job class, while that may be good for you in the short run, eventually your colleagues will get to find out and this can lead to discontent on their part extending to animosity, jealousy and alienation. It could further hinder your work as there may no longer be good team cohesion. You do not need silent internal enemies sabotaging your efforts, whispering behind your back and generally trying to set you up for failure.
So What Should You Do?
1. Avoid mentioning a figure very early in the selection process:
Some recruiters ask you for your desired compensation very early in the process and this is used to quickly eliminate anyone who they feel is asking for an amount higher than budget. What they fail to realize is that there are a whole lot of other issues around compensation that may not have been considered. Remember that
"It is always about the money, but never ONLY about the money"
Instead tell them you are very flexible and open to negotiation and that you believe the organization has a standard structure and you would be placed appropriately.
2. Understand How Compensation Packages Can Be Structured:
Now there are various ways of structuring compensation packages and Nigerians have been very creative in doing this for tax purposes. Most companies try to maximize the leeway in the tax laws to benefit both company and staff as much as possible. As a result how compensation is structured from one company to another differs. You need to understand that. You also need to try and find out if the structure where you are coming from differs from where you plan to go.
So a company can have one of two major types of structure what I call the All Inclusive Structure and the Non Inclusive Structure.
Here the organization says I will commit N20m in funds for the compensation of Manager Level 2. Which means the total amount of money the company will pay on Manager level 2 is N20m not a dime more. So included in the N20m, is salary, (basic, housing, transport; depending on whether there is an official car or not) ie take home pay and ALL his benefits, leave, pension deductions, employers contribution, fuel, phone, domestic, dressing, fueling and repairs of the car, domestic staff allowance, DSTV and club subscriptions, medical, annual holiday and whatever other allowances, all are included in the N20m, and the official car if any.
Another organization may say I will pay N10m salary PLUS other benefits. In this case the salary will be the cash portion or take home pay, ie your basic, housing and transport (if there’s no official car), and other basic allowances such as leave and pension. Other benefits may be taken up directly by the organization, The official car may be treated separately, medical allowance for you and your family would be paid by the company directly to the HMO, driver and other domestic staff would be paid by the organization, the same would follow for club, professional bodies and DSTV subscriptions etc. The total value of these other benefits for the purpose of demonstration is let’s say N15m but on your pay slip only the cash portion of N10m maybe reflected.
Now there are advantages and disadvantages of the above different structures for both the employer and employee the major difference being where control lies.
An organization that wants to have more control and is ready to handle administrative issues around managing the additional benefits will prefer the non-inclusive structure, especially when they want to ensure the image of the company is protected. So they will register all staff in top notch hospitals for their HMO, buy the biggest and best cars and handle fueling and maintenance, pay for the holidays abroad to make sure they go and pay for their club subscriptions forcing them to attend, network and generally keep up appearances in certain circles.
Now you and I know what happens when these perks are monetized under the all-inclusive structure. Most of these funds will be diverted to more "meaningful uses" such as building ones own home etc. Which is good; but some employers may not want that. They want you to look and live big, but its only superficial. Once you leave employment you have a culture shock because reality suddenly dawns on you. You don't really have any tangible assets and you can no longer maintain your lifestyle of grandeur except you were wise enough to save and invest when still in employment.
All the above will inform your decision making and also determine what kind of organization you want to work for.
So back to the negotiation table
Imagine Mr B, currently in a Non-inclusive structured organization with the N10m take home but all other perks mentioned above. He is negotiating for a job in another organization where the structure is all-inclusive. The recruiter asks for his desired compensation. He confidently says N30m, which in reality is fair using the example above. N10m take home plus N15m perks plus N5m additional compensation for changing job. At least he should earn a bit higher
The recruiter asks how much he is earning now can they see the pay slip. N10m. What? You want a jump of 3 times your current salary? If Mr B cannot explain further and justify his request, he may be dropped as being too ambitious, for asking too much, or for asking way above the company's budget for that position.
Scenario 2, Mr B asks for N15m forgetting to consider all the other perks. He may say N15m with benefits. And the recruiters may say yes there are benefits - but they may not fully explain that the benefits are INCLUDED in the N15m. Mr B may be happy and take the job only to discover by the time all the deductions are taken at source he is in effect worse off.
So How Should You Negotiate a Salary?
1. Don't be in a hurry to talk about money, make them WANT to have you on board by superseding their expectations. Do your best but be yourself at all the interview sessions.
2. Take time to define what is most important to you. Time, flexibility, money, training, growth opportunities? Would you consider the job if the pay was lower but you would be able to achieve other things important to you?
3. Understand the structure where you are coming from and try and understand the structure of where you are going, so you can compare like for like and ask informed questions.
4. Understand that there are other things you can negotiate for such as job title, level, commissions, bonus and profit sharing, terminal benefits computations, stock options, flexible working hours, distance working etc.
5. In the same vein, find out what the company needs or wants. Are there other abilities, skills or competencies you have that could be an added advantage to the company or meet their other needs? This could justify a higher compensation.
6. There are other things that you should consider such as
The look and feel and type of office,
The prestige attached to the position or the company,
The physical location, is it nearer or farther away from your house?
The size of the organization – one state, national, global?
The reputation of the organization.
The type of organization - multinational or indigenous?
Growth opportunities - what would be your career path?
Training and development opportunities, local or foreign?
Day care facilities - for nursing mums?
Terms and conditions for maternity leave - if you are a woman - Is it an equal opportunity employer?
7. Take your time, ask questions seek to understand. You can even tell them that you will get back to them while you do further research. Provide information too about the structure where you are coming from and what the benefits are, that will help them see things from your perspective and make your asking package more understandable.
8. Ask them to place you properly within their salary structure so they don't rock the boat making things unpleasant for you.
Lets consider this example, the organization is seeking to hire a level 2 manager. They like you, you have passed all the tests and they have made you an offer. Through careful negotiation you have agreed on a salary that is more than what Level 2 managers earn. That will rock the corporate boat as I mentioned in point 3 under "What can go wrong". The organization should rather increase your level to that commensurate with the compensation you negotiated for. Training should then make up for any competency gaps you may have to justify your place on that level. These are things that should be discussed.
9. Place value on yourself and have a walk away point. Don’t allow them to pressure you into something you are not happy with.
10. Remember that it is still a negotiation and all the basic principles of negotiation therefore will apply - learn them, understand them and use them.
11. Finally endeavour to keep a very calm demeanour, and smile throughout the negotiations, even if the discussion becomes unpleasant or difficult. Control your emotions, don't show disappointment or discouragement, this will demonstrate your maturity and ability to manage stress!
Written by Lady Shayo Imologome
Business Growth Strategist, Management Consultant, and Keynote Speaker