(MoneyWatch) Want to make an extra $1 million over your lifetime? Learn to negotiate, suggests Abby Euler, general manager of Salary.com.
The difference in lifetime pay for a college graduate starting at $45,000 versus one who negotiates a $50,000 starting salary and then secures a 4 percent pay hike just once every three years is a walloping $1,037,773 in lifetime income. Yet only about one-third of workers regularly negotiate salaries even though 80% of bosses expect them to, she says.
"We negotiate when buying our cars. We negotiate when buying our homes. But the thing that has the biggest impact on our financial lives -- our salaries -- we don't negotiate," says Euler.
Workers have many excuses for failing to negotiate -- they fear being denied a job; getting fired; or simply hearing "no." But if you negotiate well and in the right circumstances, your chances of getting a reasonable raise is good, she says.
What do you do?
1. Compare your salary
Your first step should be to figure out whether you are overpaid or underpaid when compared with other people who do your job. Euler notes that average salary information is easy to find on the web, including by using their site's "salary wizard" tool.
Are you underpaid, given your position and experience? Then it's pretty easy to come up with a case for why you ought to earn more, unless, of course, you're doing substandard work. Overpaid? Then, start considering why you're worth more than other people who do your job.
2. Assemble your case
It's nice if you've had a recent glowing performance review, but since not all companies regularly review their workers, you might need to find other ways to justify your raise. Put together your best case, whether it's recent projects completed with unusual skill, cost savings you've delivered to the company, additional company sales you can connect to your work, or that you've taken on responsibilities that go well beyond your job description.
Write it down and mull over the four or five most compelling bullet points that would convince you that this candidate deserves a raise. Realize that being broke, or wanting a new car/television/house is not a justification for earning more money. Justify your higher salary based on the benefit you provide to the company.
3. Be familiar with corporate finances
A company that's raking in great sales and profits is in a much better position to provide raises than one that's in a slump. So be aware of your company's financial condition before you hit up your boss. It doesn't mean that you won't be able to negotiate at all, but being insensitive to the company's finances could make you less successful in negotiations. If you work for a public company, getting its financial statement is easy online. Your company may even post it on its own "investor relations" page. If you work for a private concern, pay attention to the water-cooler chatter and how top executives spend. If everyone is acting flush and customers are pouring through the doors, it's a fair bet that the company is in good economic shape.
4. Consider your ask
If your research indicates that the company is in no condition to provide raises, a plea for a big bump in salary may not go over well. But if you're a valuable worker, you could negotiate for benefits that could save you money, instead. For instance, you could ask to work from home a few days a week, or for a flexible schedule that would allow you to avoid some day-care bills.
If there's raise money available, consider the percentage raise you're hoping for and feel you can justify. Realize that raises of more than 10 percent are rare, says Euler. They're typically reserved for people who have been promoted, transferred or were so underpaid that they're getting a "catch-up" raise. However, any percentage between 1 and 9 is fair game, as long as you have a compelling case. It's helpful to know what the average raise is and have a scale by which you can compare your performance to the average employee, however. Any data you can compile will bolster your case, Euler says.
5. Watch the timing
Be aware of when your company typically grants raises and time your request so that it fits into the company's schedule. Ideally, you would want to approach your boss a month or two before the annual or semi-annual decisions are being made, so he or she would have time to consider your case.
6. Approach your boss
Always be respectful and professional. Storming into your boss's office with comparative pay data and shouting "I am underpaid!" never ends well, Euler notes. However, making an appointment to sit down and calmly and professionally discuss the case you've compiled should only cause your boss to respect you more. If there's a reason why you're not able to get the raise you want, consider asking your boss for advice on how you might do better during the next raise period or move up with the company.
Naturally, if you feel consistently thwarted even though your work performance is stellar, you'll eventually want to find greener pastures. But keeping your discussions with your current boss civil and professional will not only help keep you employed in the interim, it may mean that you get a good recommendation for that next position.