Offer negotiation is an important factor for job seekers to consider prior to accepting an offer. Pre-employment negotiation of your compensation and benefits can make a significant difference in your bank account, job satisfaction and work-life balance.
Frankly, it is best to negotiate these matters upfront before beginning your employment. Once the company employs you, your negotiating leverage drops. You will retain some leverage after you begin the position, but in most instances you’ll find the company more receptive to your requests when they are “courting you”.
Individual circumstances can vary greatly, however, this post will provide you with a framework for how best to approach your negotiation. Of course, you can enlist the aid of a recruiter. A knowledgeable and experienced recruiter can be extremely helpful in meeting the needs of both the candidate and the client. Negotiation of any kind is as much art as it is science. The below points can help you avoid the most obvious negotiating mistakes while “artfully” negotiating those items that are most important to you. Finally, you’ll want to keep in mind that certain items are dictated by federal law and as such are non-negotiable.
Rule #1: First, collect all the pertinent compensation and benefits information upfront. Reply one time to all aspects of the offer with the understanding that, if the company meets all your conditions, you will definitely accept the position. Pertinent information is the information you need to make a final “yes/no” decision: Annual Compensation, Job Title, Vacation or Paid Time Off, Medical and Retirement Benefits, Start Date, and if applicable, Sign-On Bonus, Relocation Reimbursement, or Long Term Incentives. Minor details can and should wait for later.
Second, once you have collected all the information needed to make a response, you’ll want to prepare a thorough response to every important aspect of the offer. This response should include every modification you are requesting with specifics on how you would like it to be changed. For example, you might tell the client that you would “like to accept the position”, that you are “excited about the opportunity”, but request an additional $4,000 on the base salary, an extra $2,000 for relocation reimbursement, three weeks of vacation (as opposed to the two offered) and a start date of September 20th. This request clearly states everything you are requesting up front that would assure your acceptance of the offer. You don’t want the hiring manager and human resources to be going back for multiple approvals. It will look as though you are “moving the goal posts”, which can frustrate the hiring personnel and reflect poorly on you.
Finally, it is important to communicate to the company (and/or your recruiter) that if the company meets your proposed conditions, you will absolutely accept the position. This is important for many reasons but the most important reason is that it maximizes your leverage. Simply stated, if a hiring manager knows exactly what it will take for you to accept his or her offer, you are more likely to get it. Alternatively, they know that if they fall short on meeting your demands, they run the risk of losing you and having to start all over again with another candidate. So, depending upon how reasonable your requests are, you are more likely to receive an improved offer if the company knows you’ll accept the position.
Rule #2 Be flexible, reasonable, and responsive in all matters regarding the offer of employment. No one wants to hire someone who is rigid or unrealistic in his or her expectations. During the interviewing process, the company will clearly get a sense of your personality. They will learn more about your nature during the job offer process. You want to make sure that the company does not begin to have second thoughts about offering you the job because, for example, you focus on nit-picky, small details rather than the overall opportunity or because you have unrealistic compensation expectations. Additionally, you’ll want to be flexible about a wide range of issues including such items as:
- Receiving the job offer details over the telephone rather than in writing. (As a matter of policy, some companies don’t put offers in writing until they have received a verbal acceptance.).
- Trusting the company when they tell you the “target bonus range is XX%”. (Discretionary bonuses and other benefits specifics are rarely guaranteed in an offer letter.)
- Make yourself more readily available to speak with your recruiter or directly with the company. At this late stage in the process, you can no longer tell your recruiter “don’t call me at the office” or “I’m traveling the next few days”. Earlier in the recruitment process, issues can often be handled by email and delays are not as critical. But during the negotiation stage, letting the company know that this is a top priority for you is very important.
- To echo the bullet above, be responsive and timely in your communication. Everyone knows today’s technology means you can work and communicate from any place, at any hour. To tell a potential employer that you can’t get back to them for a couple of days because you will be attending a conference, for example, will send a clear message of “I’m stalling.” This weakens your negotiating stance as clients begin to doubt your interest in their position.
Rule #3: Recognize that your circumstances are unique and not likely to change much in the short-term. Recruiters universally cringe when they hear, “According to a salary survey, I should be earning between X and Y in compensation.” Or, “a friend of mine just took a job and got a 25% pay increase and I’m looking for something similar.” Unfortunately, your current employment and compensation circumstances are your circumstances, and no one else’s. One person’s good fortune does not translate into good fortune for you. Unrealistic expectations of how the market values your services can cause disappointment with your compensation and benefits offer.
It is important during the negotiation process to weigh the job opportunity offered to you in the context of what is the best decision for you at this point in your career. Over time, you can better position yourself and make material improvements to your employment marketability, thereby boosting your worth in the marketplace. But right now, with an employment offer on the table, you must consider your current circumstances, recognize that they are different than someone else’s, and make the best decision you can.
Rule #4: Recognize that the “perfect offer” and “perfect timing” do not generally exist. You will almost always be giving up something when you change jobs. Companies’ compensation and benefits policies are different, their job titles and organizational structures are different, and their cultures are different. This all adds up to recruiting and employment practices that will benefit you in certain ways but may detract from the opportunities in other ways. There are gains and losses with every employment offer. Think of the analogy of buying or renting a home or apartment. It doesn’t take the buyer or renter long to realize that there are pluses and minuses with every housing option. Very rarely do you find a home with a better location, more living space, all new appliances and fixtures for less money than a smaller home in need of repair in a less desirable location. Each housing option must be compared and sometimes it’s hard to know which is better. When you find the right property for you, however, you’ll know immediately and you’ll be excited and ready to make the move.
Similarly, if you have been interviewing with two or more companies, you’ll likely have interviews proceeding at different rates. One company may be making you an offer while another company is just setting up a first telephone interview. It would be great if the timing would work out in such a way that you could compare two offers simultaneously and make a decision, but this does not always happen. Even if you successfully stall one company a bit and accelerate the process at the other company, you may have to make a decision based on incomplete data. You may know all the details of one job offer but don’t know if another job offer is coming and whether the second offer will be better or worse than the first one you are currently considering. There is no simple advice that anyone can give you in this situation. It’s an imperfect situation and sometimes the best advice anyone can offer is to make the best decision you can based on available information. Some people might call this “going with your gut”.
Rule #5: Negotiate What You Can. As mentioned above, all employment offers vary based on the particular candidate, job, and company. Guidelines for negotiable items are difficult to outline. That being said, the following list represents thoughts on the major items that most candidates will find as “negotiable” when presented with an employment offer.
- Annual Compensation—For most actuaries, a 5-10% increase for a job change is common. If you are offered more, great! However, don’t expect much in the way of cost of living (COL) adjustments. (See Rule # 7 for more on COL adjustments.) Keep in mind that while you may feel you deserve more, the company has to consider “internal equity” or the rate of pay of others at your level that currently work at the company. If they offer you more than someone in a similar position that has worked at the company for a number of years, they risk creating a multitude of problems internally including, but not limited to, employee morale and retention, and budgetary problems. Also, companies typically do not want someone to take a position simply because it represents a 20% pay increase. They would rather recruit an actuary who is excited about the job and the 5-10% pay increase than an equally qualified actuary who “kind of” likes the job but is really excited and motivated by the 20% pay increase. The client’s fear is that the latter is not a long term hire prospect.
- Relocation Reimbursement—Again, this area can vary from firm to firm but most often it is based on the level of the employee. For example, junior level employees may receive lump sum relocation expense packages between $2,000 and $5,000 (gross, before taxes). For more senior employees, packages worth $25,000 – $35,000 are common. Regardless of the size of the relocation reimbursement package, the more generous offers will reimburse the new employee for moving related expenses rather than providing a lump sum payment. Reimbursement is more generous to the new employee because reimbursement of direct moving expenses has fewer tax implications than a lump sum distribution, which is taxed as income.
- Start Dates—For most companies, sooner is always better but if there is a good reason, start dates can be pushed out as many as 8-10 weeks from the acceptance dates. Good reasons may include a pre-planned/pre-paid vacation, the need to transfer an H1-B visa, or waiting a few weeks to receive a substantial annual bonus payout. Reasons for significant delay that will not reflect well on you and should therefore not be requested may include taking time off “because I want a break”, waiting for your kids to finish the semester (you go first, your spouse and children will have to follow later), or because you want extra time to study for an upcoming actuarial exam.
- Sign-on bonuses—Don’t expect a sign-on bonus “just because”. Sign-on bonuses are used for one of three reasons. First, to entice junior hires to take the position and/or to cover moving expenses. Second, to compensate employees who may be walking away from sizeable annual bonuses or other long-term compensation. Third, to make up for deficiencies in the new hire’s first year compensation. Companies universally frown upon candidates who ask for a sign-on for no reason. They look at it as a “money grab” which is often exactly what it is. As with all aspects of the offer, it is best for the candidate to justify the request, even if the justification is that “I want more money.” For example, a candidate could state the following, “My current salary is X. You have offered X + 5%. To accept this offer, I feel I need to earn X + 10% in my first year. Could you offer a sign-on bonus to make up for the difference?”
- Other Long Term Incentives—Not to be confused with nonexecutive retirement plans such as your 401k or Defined Benefit plan, other long-term incentives are typically benefits such as stock options or stock grants that are given annually based on measured criteria (most often with a vesting schedule to incentivize the employee to remain with the company). Companies do not have federal non-discrimination regulations guiding these types of long term incentives, so these benefits can often be negotiated upfront. The level of your position will largely determine the range you fall into as well as how much flexibility the company may have to “sweeten” the employment offer. You can often negotiate the dollar amounts but typically cannot negotiate the vesting schedule except at the very highest levels of the corporate ladder (SVP at a minimum).
- Vacation / Paid Time Off—This benefit typically has limited flexibility. For the most junior hires, don’t expect any flexibility. As you progress in your career you will almost always find 3 weeks as the minimum amount of vacation time with more weeks negotiable, depending upon the company. If you are offered 4 or more weeks, great! Some companies offer paid-time-off (PTO) which combines vacation days, sick days and “personal” days. PTO normally will begin no lower than 15 days, with 20-25 days PTO more commonly offered. If you are in the unfortunate situation to be offered no more than two weeks of vacation, you may have a couple of options. First, take a few days off before you start the new job. Second, talk directly to your prospective manager. It is the Human Resources manager’s job to enforce the company policy while the manager may “look the other way” if you are performing well. He/she may be well aware of the issues presented with only two weeks of vacation and will consider flexibility if you are a valued employee or desirable candidate.
- Title—Titles vary company to company. For the most part, junior level employees can ignore them. It usually has no bearing on your compensation or marketability. Getting the best work experience and the most responsibility is key, not your job title. Once you achieve your Fellowship or perhaps reach the Director or Assistant Vice President level, titles become more important. Again, depending upon the company, reaching this first “officer-level” position can lead to more generous bonus pools and other benefits. But even at this level, the meanings of titles vary. The actual total compensation and position responsibilities that you hold are much more important to your employment marketability than the official title of your position. Stated differently, if the dollars are right and the job is right, tell your ego to take a vacation. One final point; title inflation is common in positions that have significant client contact such as reinsurance. At most reinsurers, for example, there are a disproportionate number of Vice Presidents and Senior Vice Presidents as compared to primary insurance.
Rule #6 Recognize that Certain Items are Non-Negotiable
- Retirement plans—Defined benefit and defined contribution plans are regulated by the federal government. Non-discrimination testing and other federal regulations mean that these benefits are basically non-negotiable. Of course, if you negotiate a higher salary or title, you may fall into a more generous pay grade and therefore you may achieve better retirement benefits.
- Medical, Disability, Dental, Group Life and Vision benefits— Similarly, most actuaries (except perhaps at the highest levels of management) will be treated exactly the same way as other employees in relation to medical and non-medical benefits. There may be some modest variation based on pay grade/level but again, these are largely non-negotiable.
- Actuarial Study program details—It almost goes without saying that all actuarial students will be treated the same with respect to student programs at their companies. Most companies try to offer competitive study time programs. The key during the interview and negotiation process is to determine if students within your future department actually get their allotted study time and how much flexibility you can expect in determining what time off you can actually take given the needs of the department.
Rule #7 Cost of Living (COL) Adjustments Are Modest. This may come as a surprise to many younger actuarial students but companies will not fully compensate you for working in a higher COL area. There will be a modest wage premium but it will not be enough to offset the higher housing costs, taxes, or other factors. This often does not make sense to candidates but it is “good policy” for employers. The hiring company wants you to locate to their city because you want to move to their city, not because it is financially attractive to do so. The rationale is that employees with ties to the area will be more likely to stay at the company. It is important to note that often in higher COL markets such as NY, Boston, and Chicago, there are more employers thus greater professional opportunity.
A final note on COL: the best research is typically not online. Years of dealing with this issue has demonstrated to us here at Pinnacle Group that rents and home prices online tend to be much higher than you may actually need to pay. To find out the true cost of living in an area, it is best to talk to someone who has recently been house or apartment hunting in the area or do it yourself in person.
Accepting an offer of employment should be exciting for you and for the hiring company. The most important facet of accepting an offer is to make sure you communicate your enthusiasm to the company.
In the perfect scenario, you will accept the offer in a timely fashion (after negotiations). This is one important way that you communicate your high level of interest in the position. If you attempt to delay giving an answer to the company while you wait to see if you are going to receive a competitive offer from a different company, you send a clear signal of “I’m not sure I want to accept your offer”. This is less than ideal but can certainly be overcome if handled properly. Here again, a recruiter can help with the communication process. An effective recruiter will work with the company to see that they are putting their best offer on the table and also make sure that the timing will work out for both parties. If the timing will not work out, it is the responsibility of the recruiter to make sure both sides know what timing will work and urge both sides to be flexible.
NOTE: The above is an excerpt from Achieving Your Pinnacle: A Career Guide for Actuaries, by Tom Miller, Copyright 2013. It is reprinted here with permission.