When sitting in the interview chair with a career opportunity on the line, it's a natural temptation to give in on the price in order to secure the job. Resist that temptation, because a poor starting salary negotiation can hurt a software pro's career potential, job satisfaction and even the success of the employer's business.
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According to TechTarget's 2012 IT Professional Salary Survey, 14% of respondents who left their employer within the first year of employ did so over salary concerns. Obviously, poorly negotiated pay packages can lead to job satisfaction issues for employees and retention issues for the employer. It's easy for IT professionals who are negotiating a salary for the first time to inadvertently sell themselves short.
"I remember the first salary I ever 'negotiated,'" says Sal Pece, a WebSphere Portal specialist working in Toronto. "When they asked me what my salary expectation was, I said between forty and fifty thousand a year. They said 'great,' and signed me at forty."
Raleigh, N.C.-based developer Terry Clay has seen first-hand the damage done by selling one's self short in the first salary negotiation. He worked at a company where one developer negotiated a starting salary of about $50,000, not knowing that others in the same job got $75,000. Each year, raises of about 10% were given. After three years, the $75Kers were making almost $100,000 a year, but the one who started at $50,000 hadn't gotten past $70,000.
Naturally, the developer complained about the salary discrepancy, but the managers said that HR would never approve the 30-40% base salary increase needed to bring the employee up to par with coworkers. In the end, the developer found another job. Only then, when it was too late, did the employer offer to renegotiate the salary.
It was a lose-lose situation, said Clay, a JBoss specialist. The developer lost thousands of dollars in salary over several years, and the employer lost an employee who had regularly gotten stellar evaluations.
Contract vs. salaried positions
Some developers choose to be independent contractors so that they're not locked into incremental salary increases. "I've observed that once an employer has hired you at a certain compensation level in the full-time world, it's a disappointingly slow climb in salary as time goes on, and that assumes you are one of the lucky ones who actually gets a raise," says Tom Gwozdz, a software engineer in Toronto, Canada. In his experience, opting for short-term contract positions instead of career-oriented salaried positions can be more financially advantageous. "At least in the world of short-term contracts, you're forced to re-evaluate your worth and rate at the end of each term," he said.
The art of the hire
Hiring has become a highly specialized skill, and more and more companies are outsourcing the bulk of their recruitment and hiring effort to placement agencies. Rather than considering the headhunter an adversary, the job hunter should consider this liaison with a prospective employer as a great source of information and insight about how much an individual's skills are worth. Don't accept that opinion at face value, though. "Headhunters will always ask what your rate is. You're always better discovering what their budget is and working your way up from there," says Pece.
Pece advises IT job seekers to get multiple opinions from multiple headhunters and never trust the first placement agency you talk to. "Some headhunters, no matter how experienced you are and no matter how many years you have under your belt, will play down your skills and offer you the lowest rate they can," he said. "That's why you should always know your worth, and know when to find another recruiter."
Tips for starting salary negotiations
So how do IT professionals negotiate the best possible starting salary, once they've actually got an offer on the table? It can be a difficult process, but here are a few tips from Pece:
- Barter bonus packages for a higher base pay. In future years, it's easier to ask for your bonus package to be matched to the one other employees enjoy than it is to ask for a larger percentage increase in base pay.
- When doing contract work, negotiate a higher rate on a shorter contract, as the short-term cost always seems more manageable to the employer. A company can handle paying an employee $25,000 for a one-month contract when they'd never entertain paying a contractor $300,000 a year for the same work. Of course, no contract in the IT space ever lasts one month, so if you can get that contract signed, there's a good chance you can extend it indefinitely, at the higher rate.
- Always tell the employer that you have other job offers, as it makes you seem more in demand. From a standpoint of integrity, you should actually have multiple offers on the table. When employers compete for you, the natural result is a higher compensation package.
- Always try to maintain multiple sources of income, even if the secondary and tertiary incomes are not massive. It's easier to negotiate a decent compensation package if you're not desperate to obtain the position.
What about those individuals who find themselves in positions where they are feeling undercompensated? "Always remember that your quality and efforts should always remain high, regardless of rate," said Pece. Always maintain high personal standards, and always perform like the highest-paid person in the office. "That way, when you do leave, you'll leave with your reputation intact, and that goes a long way in this industry," he said.
While many IT pros are driven by the passion for the work they do, or the enjoyment they get working with industry experts, the long-term effects of feeling underpaid can erode job satisfaction, said Pece and Clay.
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