The pandemic is reversing gains women have made in the workplace over the past decade. In tandem, "The Great Resignation" is shifting the power from employers to employees. Now is the time for women to leverage this power shift and start negotiating.
I have spent my career working in executive compensation, both as a consultant, and in-house at two global retailers. Through these roles, I have seen how compensation at the highest levels of the corporate world works – and I have also seen how it fails. One of those areas of failure is the gender pay gap. Women are continuing to rise to the top of their fields, with representation improving across all levels of the corporate pipeline in 2020. However, the gender pay gap has remained relatively stable over the past fifteen years. Women with full-time jobs still earn 84% of what their male counterparts earn, and for every dollar that a man has in net worth, a woman has only 32 cents. On top of this, McKinsey predicts that the COVID-19 pandemic could set women in the workplace back half a decade.
We need to close these gaps. Women need to acknowledge their worth, and make the same money as their male counterparts, at all levels. As the “Great Resignation” plays out, millions of employees are leaving the workforce, and the power is shifting from employers to employees like never before. Now is the time for women to leverage this power shift and negotiate their compensation. Here are my top ten negotiation recommendations.
1. Understand the gravity of your first offer. Compensation typically works in percentages. When someone looks at your current compensation, to come up with a recommendation for a promotion, a new role, or a market adjustment, they will look at it through a percentage increase (for example, a 10% increase for a promotion). Given this, where you start off is incredibly important, as it is the base for every future increase you will get. It is the anchoring point for your employer, any future employers, as well as for you and how you value yourself. If you are taking on a new role or moving to a new employer, treat that first offer as the most important one you will negotiate – because it is. Every dollar you give up now has a multiplying effect in the future. Studies have found a difference of $1,000 in your starting salary could mean a cumulative loss of more than $500,000 over your career.
Tip: An employer may state that they will set your salary at a certain amount now, and then re-evaluate it in a given amount of time (for example, 3-6 months). I would encourage you to instead work to get the best offer you can now, in exchange for looking at it in the future. This aligns with time value of money principles, and also enables you to have a higher base to start from for future reviews.
2. Think about the full compensation package, and do the work to understand the bonus and equity programs. When negotiating, most people focus on base salary. This is fair to an extent, as it is the compensation that you will earn no matter what, so it needs to be at a level that is appropriate for your life. However, I would encourage you to understand the value and impact of your bonus and equity (if applicable). Seeing the offer as a total package (base + bonus + equity), each as an equally important component, will give you more leverage in negotiating. Base salaries are typically constrained by pay ranges, whereas bonus and equity can be more flexible.
Tip: Understand the bonus program: when it is earned, when it is paid out, what performance metrics are used, how they are measured, how the payout curve works, historical performance and payouts, and possibility for future program changes. One company to the next can have the same target bonus amount, but the actual payout received can be materially different based on the nuances of their program.
Tip: Understand the equity program: equity compensation is complex and takes effort to understand, but once you do, it will unlock significant value for you in negotiations. It is important to understand the types of units used (typically stock options, restricted share units, performance share units, and/or share appreciation rights), vesting schedules, performance conditions, valuation, grant cadence, share price projections, historical performance and payouts, and possibility for future program changes. And if equity is not something you are familiar with, get an advisor (see #9).
3. Treat benefits separately. Benefits can have a significant dollar value and meaningfully impact your life. However, they should be a separate discussion from compensation. For example, a great vacation policy does not make up for a low base salary. A great parental leave does not make up for a bonus program that barely pays out. Benefits are so important, especially when it comes to mental well-being at work, but should not be trade-offs. Most benefit programs are baseline across the company, so whether your base salary is lower or higher will not actually have an impact on the benefits you receive. Understand and question your benefits, as they are important, but do not use them as negotiation points for compensation.
4. Understand your annual take-home compensation over the next five years. When negotiating an offer for a new role, think about how your current compensation may change in the future if you stay in your current role. Modelling out your take-home earnings (actual salary earned in the year, actual bonus earned in the year, and actual equity vested in the year) over the next five years is extremely useful when you are comparing offers. The modelling should include annual merit increases, as well as reasonable bonus payout, equity payout, and share price estimates (if applicable). Additionally, if you are moving locations or taking a material increase or decrease in compensation, include an estimate of the after-tax impact.
Tip: if you are going to a new employer, this modelling will determine how much you are walking away from. Are there any large bonus payouts or upcoming equity vests in the next year that you should request the new company to cover? Often bonus payouts and equity vesting does not kick in for 1-2 years, so it is important to understand any gaps.
5. Understand bias. Know that this negotiation will be biased. We all are biased, including you and your boss or hiring manager, no matter what gender they are. Women negotiate for pay increases and promotions more than men do, but are much less likely to get them, and are 30% more likely to get feedback that they are intimidating, too aggressive, or bossy. Additionally, women expect and ask for lower compensation than men do – a term titled the “ask gap” – which perpetuates the pay gap. The COVID-19 pandemic is exacerbating this by worsening the biases that women already face, including higher standards of performance and harsher judgment for mistakes. Know that just by being a woman at the negotiating table, you have a disadvantage. Understand these statistics and use them to fuel you in your negotiations.
Tip: Practice what you will say and how you will say it, and be realistic about how the conversation will go. Do not be rushed to respond in the moment; take your time, and come back to the negotiating table when you are prepared. Time pressure can be used as a negotiating tactic, so set clear boundaries that enable you to prepare, do your research, and consult advisors as needed.
6. Know your non-negotiables and your risk and reward profile. Before you go into a compensation negotiation, know exactly what you are asking for, and what you will not move on. I recommend setting a baseline expectation for your stable compensation, which is your base salary, and in most cases your target annual bonus. Additionally, know your risk/reward profile. Salary is low-risk, guaranteed, and immediate; an annual bonus is medium-risk, performance-based and short-term; equity is typically higher risk and longer term. How much of your low and medium-risk compensation are you willing to give up for high-risk compensation, which potentially carries higher reward?
7. Do your research, but know the limitations. Doing your research on what people in your industry at your level earn is important because you should be as prepared as possible for a negotiation. However, there are limitations. Compensation recommendations are based on a variety of factors, including experience, time in role, level, talent pipeline, performance, location, and market data, among others. This means that comparing your salary to your colleagues’ salary is appropriate as a starting point, but it does not justify being paid the exact same. Use data to inform your negotiations but understand and acknowledge its limitations.
8. Know your strengths. If you are getting hired or promoted, it is because the company needs that new level of talent. Put yourself in their position, and understand exactly what it is that they need. Maybe it is your specific skill set, but maybe it is something more unique. For example, your ability to manage and retain a team, or the fact that you can come in and drive change. Whatever the reason, there is something specific about you, that you can do better than anyone else. Understand what that strength is and play to it. Be able to easily and directly articulate it.
Tip: Men apply for a job when they meet 60% of the qualifications, whereas women only apply if they meet 100% of them. Use this statistic to help you talk about your strengths – you should be unforgiving and confident in articulating what you can do. Understand that quick learning and facing new challenges is a powerful strength too – reference times you have started something new with little guidance.
9. Get an advisor. If you are negotiating an offer that is six figures or above, or if your compensation package will have an equity component, I recommend you get an advisor. Understanding your total compensation package and how the equity program works before accepting a new offer is crucial for leveraging negotiations, and often, unfortunately, these programs are complex. Additionally, having someone review key terms from a market perspective, such as severance, non-compete clauses, benefits, vacation, and long-term savings programs, can be very beneficial for you over the long-term. If you need support in an upcoming contract negotiation, new job offer, or compensation review, please reach out to me at [email protected].
10. Do not let your compensation define you. It is so important to stand up for yourself and your compensation to ensure you are valued appropriately for your contributions, and so we can move towards closing the gender pay gap. However, no matter how much or how little you make, it does not define you. You are not your job, and you are so much more than your pay check.