Why You Must Negotiate Your First Job Offer Out of College

Everyone is familiar with the saying, “It’s not where you start, but where you finish that matters”. For the most part, I agree with this statement. One big exception however, is your financial compensation. In this case, where you start is critically important and will play a large role in your income level throughout your working career.

In my capacity as a corporate executive, I’m a part of a good number of hiring decisions. Over my career, I’ve hired dozens of new college graduates. The first thing you must know is that in the corporate world, there isn’t really a job called “entry level”. Everyone doesn’t start out making the same salary. The reality is that if you take 5 new hires with the same degree that joined a company within 1 year of each other, each one is likely making a different salary. The highest of those will usually be the ones that negotiated a better package.

This little known concept is practiced by only the savviest of graduates. In most cases, students are just so happy to get a job offer that they don’t think to explore their compensation potential. Occasionally, a graduate will receive multiple job offers and think no further than getting the company they really want to work for to match the best offer they receive.

So why is negotiating that first offer so important?

Successful people have great negotiation skills

At the core of negotiation is the art of selling. Selling could possibly be the oldest profession known to man and it’s what makes a business successful. Whether it’s a product, service or brand, at some point all businesses must sell the value of what they offer. The same goes for you as a college graduate. You have value! Employers know this and will pay for your potential. Don’t give it away cheaply.

Benefits and future compensation decisions are based on your initial salary

Did you know that your benefits are tied to your salary? Your benefits (like employer sponsored insurance) are always a percentage of your compensation. Your employer typically pays anywhere from 25-27% of your salary to provide employee benefits. The greater your salary, the greater the investment that employer has made in you!

Human nature is such that employers want to be proven right

When employers make a decision to bring a candidate on board who may require higher compensation, we are invested. I have personally gone up on salary to get someone on the team and immediately felt like I had to make sure they were successful. The subsequent “personal involvement” to ensure that new hire had the tools they needed to develop properly was a byproduct. Psychologically, I wanted to validate the decision I made to hire this person. Trust me, this is a part of the human element of hiring people and it’s one you can exploit!

Other tips to consider?

The most important thing is to interview well and hopefully receive multiple offers. The market for talent swings wildly and timing is everything. Enter the job market in a bad economy and your leverage will be less than if you came out in good times. Having multiple offers will help you validate your value in the current market. If you get three offers for example, you should seek to accept a final package that is slightly above the top offer you received. Here are a few other things to consider:

  • If relocating for your new job, seek to negotiate the best move package as this is part of your benefits
  • Make sure any internship or co-op experience is well understood by your potential employers
  • Always interview with industry competitors, employers love to “steal talent” away from their competition
  • Know your value, but be humble and gracious. Employers will pay more for good team players

Lastly, the first offer is never the final offer. If requested the right way and future potential is apparent, every offer can be sweetened.

14 Responses to Why You Must Negotiate Your First Job Offer Out of College

  1. Pete says:

    Basically when a person is attending a job interview they are in effect selling themselves, what they have to offer etc.

  2. Michelle says:

    I should have negotiated more when I left college. I make an average amount, but sometimes I wonder if it could’ve been more.

  3. Michelle, I think we all realize that we may have left money on the table (particularly, if you graduated with a highly sought after degree). Thanks for your comment!

  4. I completely agree with this. I was offered a nice salary when I got out of school but tried negotiating anyway – only managed to get myself an extra starting bonus. However, I knew the amount I was offered was above average for someone with my experience so I was okay with that.

    After talking to other people in my field about salaries, I agree 100% that your future salary is very dependent on your first one.

  5. Superb advice. Most new college grads and some more experienced workers are afraid to negotiate! It’s totally worth it.

  6. Daisy says:

    I agree and think it’s a great thing to negotiate, but I don’t know that I will. I work in a temporary job at the company I hope to work for, and it’s a job in a government position. They usually have a set pay rate; I might try to move it just a little but I don’t think it’s very successful.

  7. Daisy, you are accurate. This was mostly about that first job out of college (in whatever your degree is in). I interned in washington DC government and there was actually a tenure based pay scale back then based on your degree level. I remember many complaining about that. My first job after graduation was in hi-tech corporate america and there, you can definitely negotiate.

  8. I’ve never been in a position where salary was negotiable. At my current job, my wages were actually set my Congress.

  9. I totally agree with this. Even though the labor market is tough right now, oddly, I think employers appreciate employees who are confident and know their worth. I would never want to hire a “yes man” who would take any offer….It doesn’t reflect well on the type of employee you would become.

  10. This is excellent advise, and certainly applicable for those exiting graduate school. Great post.

  11. Ella says:

    I wish I had negotiated at all! I came in on a low ball offer and had to work hard to get to get to a more “normal” salary level for my qualifications…

  12. MoneySmartGuides says:

    Negotiatig your salary is huge! If you can get an extra 1% when starting out it makes a big difference as time goes on. Foe every additional raise you get, it is more because of that 1%. It’s like compound interest…it builds upon itself over and over again. See the math here: http://moneysmartguides.com/negotiating-your-salary

    Don’t sell yourself short! Fight for a little more!

  13. All, great comments! Thanks for your views on my guest post and thanks to Corey @ 20’s finances for allowing me to share this perspective to his readers.

  14. This crosses my mind ALL THE TIME. When I first accepted my job, I was banging my head since I didn’t even try to negotiate that $40k figure. I realized that although I had other experience under my belt, even though it was part-time, it still counted as experience and I should have negotiated more. The worst they could have said was no. Damnit!

    I’ll be sure to do this at my next job though.

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