Smart Money Podcast: How to Negotiate Your Salary to Boost Earnings and Benefits

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn how to negotiate for a higher salary and better benefits when you get a job offer. Plus: tips for boosting your earning potential.

What are the best ways to negotiate for a higher salary? How can you elevate your earnings and overall compensation package? Hosts Sean Pyles and Alana Benson discuss strategies for increasing your income and negotiating for a raise to help you understand how to navigate salary discussions confidently and effectively.

Alana speaks with Catherine Tinsley, Raffini Professor of Management at Georgetown University’s McDonough School of Business, about who should make the first offer, how to leverage market data, and the challenge of overcoming emotional hurdles. They also discuss the benefits of changing jobs for higher salary potential, practical advice on boosting your earning potential, and why understanding power dynamics and perceived expertise could help you come out ahead in your next negotiation.

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This transcript was generated from podcast audio by an AI tool.

So, my friends, what are you worth? Or at least what are your skills worth? That’s the question you have to ask yourself every time you ask for a raise, or mull an offer from a potential employer. Today we’re looking at strategies for increasing your income through negotiation.

The most powerful anchor in any negotiation is the first offer that’s thrown out there. And so if you are anchoring the negotiation, they are playing your ball game. And so that’s why you want to be making the first offer.

Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.

This is our third and final episode of our nerdy deep dive into investing in your income. Basically finding ways other than cutting back on spending to boost your bottom line.

Yeah, Sean. So, as we’ve been talking about throughout the series, sure, you can cut back on some of the daily indulgences you might be able to do without, but cutting back five or 10 bucks here and there, even daily, is unlikely to make you rich, or even to be able to retire. What really makes a difference is having more money coming into your bank account. And as we’ve discussed, there are a lot of ways to do that, but one of the best ones is by getting a bigger paycheck.

Yep. And of course there are a couple ways that you can do that. You could ask for a raise or some other form of compensation from your current employer, or you could get a new job.

And here is why that second option is the real winner. So, stay with us. There are a lot of numbers here, but I promise it is worth it. US inflation in December 2023 was 3.4%, and according to WTW’S December 2023 Global Salary Budget Planning Report, average salary increases in 2023 were 4.4%. That leaves you with essentially a 1% raise if you were to stay at the same company, if you’re accounting for inflation. On the other hand, if you change jobs, you can often expect an increase between 10 and 15%, or even up to 30% or more, if you play your cards right.

Okay. So, the key to getting any of that, whether you’re asking for a raise or seeking out a new job, is that you’re likely going to have to negotiate. And that’s a word that gives a lot of folks hives.

Hi, it’s me. I’m the one with hives. Do you remember the first time you did a salary negotiation, Sean?

Yeah, it actually was at NerdWallet, and it did make me really uncomfortable. I knew that I deserved more money, but I just didn’t know the right process for having that conversation. My boss and I worked it out, but it wasn’t enjoyable. I can tell you that. Alana, what about you?

Yeah, I believe it. I alluded to this in the first episode, but at my first job negotiation, I was told that I was greedy and selfish. I was told that it was completely unprofessional to negotiate even though I’d googled this within an inch of my life the night before. My boss told me that they would forgive me because I was, quote, “young and didn’t know anything about the job world.” The good news is that I left that job soon after and close to tripled my salary. But yeah, I have a lot of emotional baggage when it comes to negotiating, but that’s part of why I’m so passionate about this topic. I want people to know that there are some really specific ways that we can make this whole negotiation process easier on ourselves, and we are going to hear about those today.

All right, well, we want to hear what you think too, listeners. To share your thoughts about ways to boost your income, leave us a voicemail or text the Nerd hotline at (901) 730-6373. That’s (901) 730-NERD, or email a voice memo to [email protected]. So, Alana, who are we hearing from today?

Today we are talking with Catherine Tinsley. She’s the Raffini Professor of Management at Georgetown University’s McDonough School of Business. She’s an expert and teaches courses in negotiation, so she’s going to walk us through some of the do’s and don’ts when you’re asking for more money.

That’s coming up in a moment. Stay with us.

Cathy, welcome to Smart Money.

Thank you. It’s a pleasure to be here.

I just kind of want to start us off with talking about negotiation in general. Why is it so difficult for a lot of us to negotiate, whether that’s at a job for more money, with our partner for household equity? Negotiating is just a really difficult thing to do. So, why is that?

Yeah, it’s true, and I think there are a couple of things that tend to block us. The one thing to think about when you’re negotiating with a job, or you’re negotiating with a friend, or you’re negotiating with a partner is that you know it’s going to be a repeated interaction. So, there’s some sort of interdependence. You may not want to ask for something if your fear is going to trigger some sort of negative response. Maybe you’ll get your way now, but down the line, you won’t get something that you would’ve. So, the fact that it’s this repeated interaction over time tends to make people a little bit more wary of negotiating. I think another reason, particularly at a job, is that there’s a presumed power difference. Now, you’ll notice that before I said with the repeated interaction, there’s an interdependence.

Interdependent means that there’s actually power on both sides, but we tend not to think of the power that we have. We tend to think of this big company as having the power, and we don’t have any power. So, there’s sort of a presumed power asymmetry. And then the other thing I think that goes on is that there’s sort of a presumed information or expertise asymmetry that they know a lot more than you do. So we’re just a little bit wary of engaging with someone where we feel like we might be at a disadvantage.

That’s such a great point about the power dynamic because I’ve definitely felt that going into things where you just feel like you’re the dumbest girl in school, as I like to call it. Everyone else knows all this stuff, but that really isn’t necessarily true. In reality, these jobs are looking at you because of what you know, and you are an attractive candidate because of that.

Exactly. And so that’s one of the things that you have to remind yourself is that power is the inverse of dependency. So, the more that we are dependent, the less power we have, but it’s all about relative dependency and relative power. To the extent that you’re an attractive candidate or you’re an attractive worker relative to their other alternatives of other workers, then you do have power. So, they have power to the extent that you really want to work for them, and there are no other attractive job opportunities for you. But you have power to the extent that you are a more attractive candidate than other people are, or you’re a more attractive worker, you’re a good worker.

I want to kind of get into the nitty-gritty here of when it comes to negotiating, and I want to first make the differentiation between negotiating at your current job to get a raise or negotiating for a new position at a different job, or even leveraging a new offer at your old job. They’re all so different. How would you start the process if you were going to just try to negotiate for a raise at your current job?

There are some contextual differences in all of the cases that you just mentioned, but there are a lot of common themes. What I might suggest that we do is actually talk about some of the common themes first because it makes for a little bit of a checklist, and I want people to be able to think, okay, first I do this, then I do this, then I do that. Because I think breaking down the process might help people a little bit.

The first thing is that you have to negotiate with yourself. What’s really important to you? Yes, salary is important, but what else? These could be non-monetary things like freedom, flexible work arrangements, promotional opportunities, job assignments, those things that could be important to you. Or they could be other monetary things that are not salary, like performance bonuses, training bonuses, reimbursements, memberships, childcare, student loan help, all these kinds of things that we tend to not think about as directly related to the negotiation, but they really are, and they can be incorporated. One of the classic moves that you want to do in negotiation is to open up the negotiation space. You don’t want to make it just about salary if you can because in making it about multiple issues, you’re giving an opportunity now to create trade-offs, which is kind of going to bring me to my second thing. So, my first thing is to negotiate with yourself. What are all the kinds of things that you want, and how important are each one of those things for you?

And maybe write out a list of that kind of thing.

Yeah, exactly. The second thing is to do your homework. You want to think about the other party and think about what is important to them, and what might be important to them other than money. This kind of pivots you from a demand approach to a mutual problem-solving approach, which people feel a lot more comfortable with. If you can think of yourself as part of a team with the other party that’s trying to mutually solve this puzzle so that both of you can get most of your way, I think that helps people psychologically. So, how are you helping them to meet their needs? And then the other way that you should be doing your homework is that you should be looking at comparables, at benchmarks. You should be looking at internal and external labor market standards. For example, what you’re asking for in terms of salary, and information is really gold here.

To the extent that you can find out any information about what peers are making, about what people in similar companies are making, what people with your same education that have done a similar type of job, any information that you can find out in the marketplace, both in the internal labor market, by which I mean within the company, and the external labor market. That’s really helpful.

And that’s the kind of research that you can do on a site like Glassdoor, LinkedIn, other places that have those types of comparison data, correct?

That’s right. And if you are currently employed, you can probably ask some of your friends. I know that a lot of people think, “Oh, my gosh, asking about salary is so confidential,” but there are big pushes now to actually make salary data publicly available in many contexts. You would actually be surprised if somebody is a good friend, too. They’re probably going to be sharing some information with you.

Yeah, I think that it’s so immensely important to have those conversations with people at your company, with people in your industry, because the only people that benefit from salary conversations being taboo is employers. That is incredibly unhelpful to employees, and incredibly unhelpful to the people trying to make a fair wage. By saying, “Oh, it’s culturally inappropriate,” that is very, very beneficial to one of those parties and very detrimental to the other party.

Right. And so that should help people to go ahead and ask the question. It should help people to go ahead and answer the question, too, for their friends. One of the things I say to my students, I say it to my kids, I say to anybody that listens to me is life is about reciprocity. Life is about making relationships, and in making relationships, you have to have some amount of trust. That means there’s always going to be some give and take. I think it’s really great if you can give before you’re asking.

So, how can we kind of get into the specifics? Do you just go to your manager and say, “Hey, I think I should be making more money?” What should that conversation look like when you are asking for a raise?

My advice is twofold. First, be specific. Don’t just say, “Hey, can you help me out a little bit? Could I have a raise? I was thinking I should make more.” Vague is not going to help you here. You need to anchor them by giving them specific numbers. Now, what’s really interesting that people won’t think about is that non-round numbers make for stronger anchors. For example, it’s better to ask for $83,500 than to ask for $85,000. Why? Non-round numbers are somewhat surprising. When I just said give a non-round number, say it like 83-5, you’re probably thinking, “Well, that’s kind of an odd number.” It makes you think. If it’s a round number, there’s something called cognitive fluency, which is just like, “Oh, yeah, yeah, I get that.” It’s sort of like your mind doesn’t have to think as hard about it, so it doesn’t click in there, but if your mind has to think a little bit, it clicks in for the other person.

So, it’s more likely to be a strong anchor. Now, what does that mean? If you think of an anchor, like an anchor of a boat, once you put the anchor down, that boat is not moving around too much, right? It’s hard for the boat to move too far from the anchor. Similarly, in negotiation, it’s hard for the other party to move too far from your anchor, and the stronger the anchor, the less likely they will deviate from it. So, the first thing is that non-round numbers tend to be stronger anchors.

Now, this I don’t have any scientific evidence for, but it’s what I believe, and that is when you give them a non-round number as an anchor, it tends to suggest that you’ve put some thought into it. The fact that you’ve come up with 83-5 seems like you’ve done some sort of calculation that is making that an important number for you. So, that’s your anchor. You need an anchor, and you need accounts. By accounts, what I mean is why is that anchor relevant? Why is that anchor justifiable? You have to be able to say with a straight face why that is the right number. That relates to what we just said, too. It relates to the whole idea of doing your homework with the benchmarking and the comparables.

So, say you’re a salesperson, and you are currently making just for round numbers’ sake $100,000, and you go on Glassdoor, you do your research, you see that salespeople at your company on average are actually making 120. You look at people at other companies that are in a similar industry, and you see those salespeople are making around 125. Based on what you bring to the table, your years of experience, you say, okay, I think 123-5 is the number that’s most appropriate for me to ask for. Is that kind of how you would come up with that number?

There’s a couple of things to unpack there. The first is if you decide that you really want 123-5, you actually have to open higher than that, right? You actually have to open higher than what you’d ideally like to settle for. That’s suggesting to me that what you need to open with is something that is closer to 129, $129,000. If they say, “How did you get there?” Then you can say, “Well, I’ve benchmarked, and it looks like it’s about $125,000 is the average, but I’ve always considered myself to be an above-average worker,” and you’ve got to be able to justify that too, right? Based on either the performances you’ve had in the company or based on something that you can demonstrate from the interview. You use sort of this notion that this is the average, but I know that I’m getting recruited because I am above average, and I think we’ll both feel comfortable with this, and it’ll make me work really hard for you to know that I’m getting paid above average. Will you get that? I don’t know. But you have to start higher than what you’d ideally like to settle for, right? We all know that.

So, how would this sort of differ between if you were leveraging an outside offer to try to make more money at your existing company versus if you really don’t like where you’re at right now and you just want a new job? What would those situations look like, and how would they differ?

I think that you’re getting at what everybody knows to be true, which is that if you have an outside offer, you have a lot more power than if you have no offer that you want to take. If you have an outside offer that you are very happy with, then you use that alternative as a way of increasing your confidence to be able to ask for more within this particular negotiation. Now, let me caveat that by saying if you actually aren’t serious about the company, this company that you’re negotiating with, you shouldn’t negotiate with them. If you aren’t seriously going to consider an offer from them, then please don’t negotiate with them because that just eventually hurts everybody. It really should only be because you seriously think you could work for this company. I actually think that salary is one of the least important criteria in deciding whether or not you’re going to work for a particular company. I think the assessment of culture and fit, and whether you like the people that you’ve interacted with, are way more important than an extra $10,000 or $20,000.

You touched on this in the beginning, but there are so many different components to a job offer, and I wanted to talk about some of the things that maybe people don’t realize that they can negotiate on, such as vacation time or remote work possibility. Company equity is, I think, a really big one that people forget to ask about. How do they phrase asking for those things?

So, there’s a lot of things, right? You can ask for continuing education or training possibilities. You could ask for certain job placements, you can ask for student loan help, you can ask for childcare help, you can ask for a housing allowance, you can ask for moving expenses. You could ask for a signing bonus. In years past, people have asked for things like transportation vouchers as well as what you said, equity, some kind of variable pay, pay for performance. The other thing that you can ask for if they say, “We just have this package that we give everybody, all our entry-level people get this,” then you ask for an early review date. I’d love to have an early performance review, and at that time, then we can assess how my performance has been, and make me eligible for promotional opportunities.

That way you bring up that opportunity to potentially make more money faster.

To go back to when you’re in this stage of figuring things out, what is your take on salary ranges? When to state a number if there is no salary range? I’ve heard some people say you should say your number first. I’ve heard other people say, you’ve got to wait for the company to say a number. What do you think people should do when they don’t have any information on a salary range? And how do you think people can get to that topic?

Common wisdom is that it’s better for the other party to throw out the first number, the first anchor, but it turns out that common wisdom is wrong. Now, I’m going to caveat this in a minute, but let’s just think about why. So, common wisdom is wrong because the most powerful anchor in any negotiation is the first offer that’s thrown out there. If you are anchoring the negotiation, they are playing your ball game. That’s why you want to be making the first offer. Now, that said, a couple of things. One, to the extent that you feel a power differential, and you really are feeling like, “Oh, my gosh, I’m this little thing, and they’re this big company,” you’re going to lowball yourself. So, they don’t even have to do the negotiation work at all. You’re doing it for them.

The second is, the more you’ve prepared, the less it matters who really throws out the first number, because you still have your opening offer, your number in hand, and you won’t necessarily be thrown by their anchor. So, if you have absolutely no information from the company about salary, I kind of find that difficult to believe that companies put out zero information about a position. But if that’s the case, then I think the best thing that you can do is try to get external labor market information for comparable jobs. You need something to back up what you’re asking for.

Do you have any tips for particularly women, or people of color, other marginalized groups who historically have kind of been at a disadvantage in the workplace generally, and when it comes to negotiation? I saw a study that came out recently that was saying some of the traditional wisdom for women negotiators may differ. What is your take for people who are kind of coming at this from a different experience?

Obviously, we can’t solve a legacy of structural inequity by people negotiating, and I do think that it’s a little unfair to put the burden on the historically disadvantaged people that have to now be brilliant negotiators to make up for it. That said, I know that’s not what you’re saying. One thing I might also mention is that you sort of have two choices with your emotions. Either you can own them, or they will own you. So if you know that you’re going to be uncomfortable, you need to own it, and you need to figure out what you can do for yourself to not be uncomfortable while you’re asking for things, whether that’s practice, whether that’s getting a coach, whether that’s having a friend give you feedback on things. Otherwise, you’re going to be owned by your emotion. One other thing I guess I will say, too, that it’s just sort of dawning on me as I talk about this is I sometimes put my emotions on the table when I’m negotiating if I am uncomfortable.

You don’t have to hide it. I’ll say something like, I’m feeling a little bit of discomfort in having to negotiate this. I know it’s part of the process, but it’s not something I have a lot of practice with. If you name it, then I think it actually in some ways shows a courageousness because you’re saying, this isn’t completely easy for me to have these conversations, but I know they’re important, and so I’m going to have them. I’m having this difficult conversation with you because I trust you, and I think that you’re going to do right by me, and I’m just going to put myself out there. If you can give them implicit messages, how is that not endearing?

And I love how that humanizes you, too. Again, it’s like building that connection with the person that you have to negotiate with. Instead of forcing you to sit on opposite sides of the table, it really brings you around to sit on the same side of the table and solve a problem together.

That’s right. You’re showing empathy, and you’re acknowledging that they’re showing empathy. I mean, it’s sort of like acting as if, and I find that oftentimes people come through for you. You do not agree at the table when you are negotiating, you do not agree and say, “Okay, great. Done.” You can say things like, “Well, this all sounds really good. Can you send me the offer in writing, please?” Always get it in writing. You’re not agreeing at the table. The point of the negotiation at the table is to get something in writing that you can then later evaluate.

I love that tip. Catherine Tinsley, thank you so much for helping us out today. It was great talking to you.

Thank you so much for having me on.

Alana, I so appreciate how you and Catherine talked about how negotiating doesn’t have to be this combative exercise that it’s often made out to be. Yes, you may have to navigate a power imbalance. Yes, this can feel uncomfortable. But reframing a negotiation as a means of collaborating so each party gets what it wants can make it feel much more accessible. You are there to get the raise or benefits that you deserve. The employer is there to ensure that they have the skilled, happy workers that they need. You both have something to gain from this negotiation.

Yes, exactly. So, it can be easy to feel like you’re on opposite sides of the table, but you’re right. In the end, it’s likely that your employer and you want the same thing, for you to stay and be happy there. If you keep that in mind, it’s easier to remember that you have the same goal. You just have to agree to the terms.

I think the really big lesson here is one we’ve been talking about throughout the series, which is yes, you can sweat the small stuff. It’s fine if you think it will help you to cut down on lattes and dinners out and that sort of thing. If you want to improve your finances, do what works for you. But if you’re looking at big financial goals, you’re going to want to take much larger steps to meet them.

Yep. And finding ways to boost the money that’s coming in the door instead of obsessing over what’s going out could be a faster and more efficient way to achieve those goals in the timeframe you want to accomplish them. So don’t be afraid to negotiate, don’t be afraid to ask for what you believe you are worth, and do the homework to prove it. And really think through the skills you bring to the table that can bring in more income, whether that’s at your existing job or at a new one.

Well, Alana, thank you so much for leading the series. I’ve certainly learned a lot, even if I’m still a little bit nervous about getting too deep into LinkedIn.

That’s okay, Sean. I am so honored to be here. Thank you for having me.

Always happy to have you. For now, that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at (901) 730-6373. That’s (901) 730-NERD. You can also email us at [email protected]. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

This episode was produced by Tess Vigeland. Sean helped with editing. Kevin Berry helped with fact-checking. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.

And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.