Starting a new job comes with a whole host of new challenges. New people, new workplace, new challenges and… a new employment contract.
For a lot of people, ensuring you get fairly paid for your work is difficult. The road to signing on the dotted line is littered with hurdles.
How much is my time worth?
How much do I ask for?
Can I ask for share options, and should I?
What happens when I disagree with what they want to pay me?
These are all questions I’ll try and answer here. My experience comes from three perspectives:
I know it’s a cliche. But it’s for a different reason than what you’re expecting.
If your company tries to discuss terms with you verbally, always make sure they know you will only agree to terms included in a written contract. You don’t have to be abrasive about it — here’s an example.
I got offered a standard salary versus a commission-based salary in an early job application. The employer asked for confirmation on which I would prefer before I’d seen the full contract. I said, “I’m not sure, really. I’d prefer to see both on a piece of paper, just so I can think about it clearly and in my own time. Sometimes I think a bit better when my options are laid out in front of me.”
They were cool with it. If they weren’t — I would have been a bit concerned.
By doing this, you’re able to take your contract home and review it in the peace and quiet of your own space. You don’t have anyone badgering you to sign it and be done. It’s not something that should be rushed.
Most of all, it means you can go in prepared to any negotiations. And being prepared is absolutely crucial in getting what you want out of the relationship.
A sports coach of mine used to say: “Failure to prepare is preparation for failure”, and then make us run laps around a rugby field. Needless to say, the saying stuck with me.
So — preparation.
Before you go into any negotiations, know what you want. It seems obvious to say, but most people aren’t exactly sure what they want in return for working for someone else!
Money, sure. But how much? How do you want your performance increases to correlate to increased earnings? What if you bring a big idea to the table that makes your company millions?
I made the mistake of not being fully prepared in my first job application. I went into our final ‘confirmation’ interview (after I’d been told I had the job) without having put any time into considering what exactly I thought I deserved to be paid, or anything else I’d like to include in my contract.
So when the question was sprung onto me of a starting salary, all I could really say was “Okay, that seems fair.” Luckily for me, it was.
When a company hires you, they’re after your particular set of skills. They want you because you add value to their operation. The thing is, until you start, they don’t know how much of your potential will actually be realized.
They’re basically guessing as to how much value they think you’re going to provide for the company, based off two things:
You might have all the right credentials, but you’re not a hard worker. That equals pretty low value contribution. Alternatively, your qualifications might be a bit lean, but you’re a very quick learner and have a great work ethic and drive. Value creation = much higher.
You know yourself best, you’ll be the best positioned to know how much value you can provide.
Now you have to convince your employer you will provide that value.
The best way to do that? Make a bet on yourself.
Make your remuneration package highly dependent on your performance. If you’re earning a large portion of your salary from commission — that’s great. If you’re not, then work performance targets into your salary package so that if you hit them, you get paid more.
As an example, let’s use a non-commission based job, like a project manager.
Say you’re getting hired as a project manager for a dev team that is building a new app for your company. What is valuable to them in this project? Making sure its on time, within budget, and delivered according to spec. So set performance goals according to that. Here’s what I’d say:
“I understand you’re taking a risk hiring me, so I want to show you how hard I am willing to work for your company. I’ll take a below-average salary to start, but when you realize how much value I am providing for your company, we can revise accordingly.”
“If I can complete this project on time, within budget and delivered according to your project outline, I’d like a salary bump to x.”
The trick here is to make sure you then perform — so don’t over extend yourself.
Make sure there are review points set in your contract so that 3, 6, 12 months in you have the opportunity to sit down and make your case repeatedly for what you’re contributing. If it’s in your contract, you’re much more likely to get a meeting to discuss your performance than if you say 6 months in “I’d like to please discuss a salary raise.”
Share packages are a tricky one. Some employers are more open to it than others, and some situations suit it more than others.
A few of my friends work at a large international investment firm and I know that they have share options which vest and grow after 5 years of employment at the company. This improves skill retention an incentivizes employee performance.
If you’re joining a small company, they’re more likely to be able to offer you share options. Expect them to only vest after a few years, though. This is normal. The reason is, in small companies cash is sometimes a precious commodity. If they can make part of your salary shares, they can fork out less cash which can be used for other operations.
Remember, it’s not for everyone. If you’re starting at a company that you don’t 100% believe in, but you’re desperate for a job, don’t take shares in place of money.
In the same way, make sure you’ve done your due diligence on your employer before you accept shares as part of your salary package. Make sure that the business model is sustainable and your shares will be worth an equivalent amount in cash after x amount of years of work.
Remember, taking shares as part of your salary package can be risky. It is a risk that can pay off well, but it can also go badly. Make sure you weigh up the pro’s and con’s and align your decision with your financial plan going forward.
So you know you have to go in prepared, have a plan for creating value, and base your salary largely on proving yourself to them. But how do you decide on what your starting salary should be?
This is different for different people, but you have to be earning enough to live off.
Some people have savings, or some sort of safety net they can rely on, others don’t. Make sure you’re able to live, regardless of your situation. If you can’t, either downgrade your lifestyle temporarily, or ask for more.
Where do you fit in in the spectrum of skills in your industry? Are you at the top level of skill set (i.e an expert in your field), or are you just starting out? What are the salaries associated for each? Compare yours accordingly.
If this isn’t your first job, you left your previous company for this one. What were you earning there?
Remember, there’s a reason you left, make sure your decision to move to the new company is front-of-mind. If you moved because of a better salary offer, make sure you get it.
If you have a particular set of skills, you more than likely could be using them to be growing yourself a business.
This is more applicable to some occupations than others, but the just of it is, when you’re working at a company, you’re building an asset for the owners of that company. They can sell that asset.
Think about whether you could do what your company does independently of them. If you feel you could, they need to provide you with enough compensation to incentivize you otherwise.
Don’t do it.
It’s easy to just accept an initial offer because you’re desperate for a job.
Most companies will shoot low and hope after negotiations to come to some sort of a middle ground. Avoid negotiations. Rather be clear on what you know you are worth and then leave them with an offer. If they’re serious about you, and you present your case clearly, they’ll likely match your offer — if it’s fair.
I have an ingrained belief in the human spirit.
Most people want to find a resolution to these situations that is mutually beneficial. Work hard in trying to find that solution so both you and your employer are satisfied. It’s the first step in a prosperous journey with your new company.