How to Negotiate Salary Without Disclosing Past Earnings

how to negotiate salary

A survey by Salary.com revealed that only 37 percent of workers always negotiate their salaries when starting a new job. And just 44 percent occasionally negotiate, while almost a fifth of workers (18 percent) never negotiate their salary, according to Salary.com.

But why is this such a big deal? Because if you don’t know how to negotiate salary, you could be missing out on a fortune.

As Business Insider demonstrates below, if you don’t negotiate a higher salary at the start of your career and negotiate periodic raises, you could miss out on more than $1 million in earnings. This is money you could use to pay off high-interest student debt, buy a house, or save for retirement.

how to negotiate a salary

Image credit: Business Insider

“The biggest mistake is not negotiating,” Julie Cohen, a personal career coach and CEO at WorkLifeLeader, said. “Even if you don’t have other options and would take the job at the salary offered, you’re likely leaving money on the table if you don’t ask.”

Learning how to negotiate a salary may soon involve a different process for would-be job seekers, as many cities and states have moved toward banning employers from asking about salary history.

In fact, the office of Mayor Bill de Blasio reported companies in New York City are now banned from asking applicants to disclose their salary history. And California is also moving toward a similar rule.

This is good news for job seekers. While past salary is often a starting-off point for negotiation, cities and states are banning questions about salary history because these questions could be perpetuating wage discrimination. Plus, without being boxed in by your prior salary as a starting-off point for negotiations, you may have more flexibility to argue for the salary you believe you deserve.

The only possible issue: When you don’t use your prior salary as a guide, you’ll need to do a little more research to find out what a reasonable salary might be so you’re prepared for the negotiation process. Here are a few key tips from experts about how to determine your desired salary and how to approach the negotiating process.

1. Know the market rate

Before you begin salary negotiations, it’s important to have a clear understanding of what’s realistic.

“Know what the approximate market rate is for the position you’re applying for in the specific field, function, and geography,” Cohen said. Going in with research — not anecdotal evidence about what your friends make — shows you’re serious about getting the money you’re worth and that you have evidence to back up your salary ask.

When you’re not allowed to disclose your past salary, it’s especially important to know what someone in the same job, in the same area, and with your experience level is paid so you have a basis for negotiations.

“Let them know that you have researched the field and the typical salary range for this job is X amount,” Hallie Crawford, a certified career coach and founder of HallieCrawford.com, suggested. Crawford recommended using Glassdoor to research the prevailing wage for the job you’re under consideration for. Payscale.com and the Bureau of Labor Statistics also have comprehensive information on earnings for various professions in different parts of the country.

Even if you live in a state where you’re allowed to disclose your salary, you’re still better off referencing a researched number for your desired wage, rather than going off of what you’ve earned in the past.

“Unless you feel your current salary is especially impressive and you’re trying to get them to offer you more to lure you away from your employer, your answer should really be based on what the job at hand is worth — not what some previous hiring manager thought the job was worth,” according to Rita Friedman, a certified job and transition coach at Philly Career Coach.

2. Show you’ll add value to the organization

If you’re asking for more money than you were initially offered, be prepared to explain why you believe you deserve higher pay.

“It’s generally a more effective strategy and a better platform to advocate for yourself if you link your value to what you are offering the prospective employer than it is to expect your value to be based on some unrelated factors, like what you feel you need to live on, or what you feel you deserve because you are a certain age, or what a salary calculator website estimates is an average for the type of position you’re targeting,” Friedman said.

This should be something you focus on throughout the interview process so your employer is more likely to consider you a top hire. Jacqueline Twillie, a negotiation trainer and author of “Navigating the Career Jungle: A Guide for Young Professionals,” advised in  FastCompany that candidates who want more leverage in salary negotiations should consider the STAR method during interviews to show how they’ll add value.

The STAR method stands for Situation, Task, Action, and Result. When asked a question, think of a situation or task that allows you to illustrate your skills, explain the action, and detail the positive results.

By demonstrating you’re a strong hire throughout the interview process, you’ll maximize your chances of getting the salary you’re looking for.

3. Bring up salary at the right time

When hiring managers can’t base their offer on your past salary because they’re banned from asking about it, they may be especially eager to find out what you think constitutes fair pay. But, just because a hiring manager asks about your salary requirements doesn’t mean you have to disclose immediately.

“If the hiring manager asks what your salary requirements are, don’t be too quick to answer, especially if they bring it up early in the interview process,” Crawford advised. If salary issues are raised during the first phone interview, for example, it may be too soon to throw out a number.

So, how should you respond? “Let them know you need time to consider it. You can say ‘I’d like to ask about benefits. I’m sure that you are offering a competitive salary for this industry.’ This lets them know you are expecting a fair offer,” said Crawford.

Friedman also suggested another possible response to put the ball back in the employer’s court: “My salary requirements depend on the details of the position and the total package — I’d want to know more about your expectations for this role before slapping a hard number on it. Can you give me an idea of what the position is budgeted for?”

Delaying negotiations often pays off because you have a better chance to make yourself a must-hire candidate the further you go into the interview process. “After you get the job offer, and have shown your prospective employer how valuable you are, then you can negotiate,” Cohen said. “Don’t bring up salary before you sell yourself. They need to know you’re the right, best candidate. You are setting the stage for negotiation by showing that you are the best person for the position.”

4. Leverage other offers

While some locales may ban you from sharing your past salary, this doesn’t mean you can’t disclose what another company has offered you.

“The best way to maximize salary negotiation is by having multiple job offers to leverage,” Cohen advised. “You will want to keep as many irons in the fire as you search for your next opportunity.”

While it’s common for people to stop the job search when they’ve been on a few promising interviews and believe they’re on a path to being hired, Cohen recommends that you keep your search going. “You should aim to approach the job search with parallel opportunities.”

5. Don’t forget your other benefits

Finally, during the negotiation process, don’t limit yourself to just asking for a higher wage.

“Aside from your salary, find out what benefits the job offers,” Crawford advised. “This could be vacation time, health insurance, daycare, or education. You may find that it’s worth it to accept a lower salary amount if you also will get additional benefits.”

CNBC lists five other crucial benefits that can become part of your salary negotiations: Medical coverage; disability and life insurance policies; retirement contributions; paid vacation; and benefits that impact your work/life balance, such as flex time. If you can’t get your employer to give more ground on salary, they may be much more willing to meet you in the middle on these other valuable benefits if you know how to negotiate a salary effectively.

Why learning how to negotiate salary is so important

A CareerBuilder survey of 4,600 employers found that 52 percent of employers offer candidates salaries below what they’re willing to pay. For 26 percent of employers, the initial offer is $5,000 or more below the amount they ultimately expect the candidate to receive. This is a huge amount of money you’ll miss out on if you don’t know how to negotiate salary, especially if you consider that future raises are based on your initial starting salary.

This chart shows how much of an impact your failure to negotiate a salary could have on your earnings over your career. It’s based on the assumptions that you could get an extra $5,000 by negotiating and that you’ll earn annual raises of 1 percent off your starting salary.

Starting Salary of $40,000 Starting Salary of $45,000
Salary after 1 year $40,400.00 $45,450.00
Salary after 5 years $42,040.40 $47,295.54
Salary after 10 years $44,184.89 $49,708.00
Salary after 15 years $46,438.76 $52,243.60
Salary after 20 years $48,807.60 $54,908.55
Salary after 25 years $51,297.28 $57,709.44

If you didn’t negotiate, your career earnings would total $1,181,025.26 over 25 years — but if you started with that higher salary, you’d have earned $1,328,653.42 during that same time period. The difference is $147,628 — and that’s if you never negotiated a raise above one percent.

Don’t miss out on your chance to get the best base salary possible when you start a new job. “This is the time you have the most leverage, before you’ve accepted an offer,” Cohen said.

Of course, you also need to consider the big picture when considering how to negotiate salary. “Remember that it’s important to be flexible in a negotiation,” Crawford said. “Determine the lowest salary you could pay your bills with, and then ask yourself how much you really want the job. You may not get your ideal salary amount, but if you love the job opportunity enough, it may be worth it to you to accept the lower salary.”

Just make sure you’re earning enough to pay off your student loans, pay your other essential bills, save for retirement, and accomplish your financial goals.

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