Current employer vs. outside employer
Negotiating salary for a new role within your organization versus a position with a new employer can be worlds apart since organizations may have different compensation structures for calculating salary.
Whenever I negotiated salary for a promotion or new position within my current organization, I would consider such factors as:
- The experience needed for the new position
- The additional responsibilities of the new position
- The unique qualifications I brought to the table
- The certifications or credentials I should have
- How I could leverage positive past performance reviews for a higher salary
- The cost of living, including inflation, where I would be working
Looking to a new employer changes those considerations. Rather than focusing on how I, as a known entity, can bring value to and be compensated for a new role, I focus instead on big-picture organizational factors like:
- The job description and requirements
- The organization’s revenue and profit margin health (e.g., is it a big, profitable company that can pay high competitive wages?)
- The competitive landscape for my functional skill set in the open market
- How other organizations in my geographical area typically compensate this particular position
So, which is more advantageous in terms of salary potential? That may depend on where you are on the corporate ladder. According to a 2022 Nasdaq article, which reviewed data from a Massachusetts Institute of Technology study, employees in the lowest 25% paid occupations benefited more from switching companies.
On the other hand, high earners (or those taking home the top 25% of salaries) benefited more from promotions.
In my experience, leaving one company for another has offered more opportunity to command a higher salary. At least at the organizations where I’ve worked, promotions tended to result in a slight cost-of-living increase alongside a minimal raise rather than a significant pay increase.
There’s another factor to consider when negotiating salary, and that’s the economic climate. In times of economic retraction, companies may have less revenue or business even as the costs of goods increase. This combination results in declining profit margins, which lead to less room for paying higher salaries. As businesses react to inflation, in other words, it will have a direct impact on the salary you can negotiate.
With that in mind, let’s dive into some of the ways you can negotiate the best salary possible.
1. Leverage your credentials
In my experience, having the right degree, the right certifications and relevant experience gives you the best opportunity to negotiate the highest salary for your desired position.
Can that be guaranteed? Of course not. Sometimes, you can have all the right credentials and still be underpaid. But I’ve found that, when it comes to negotiating power, the more education and experience you have, the better position you’re in to ask for what you want.
Government employment illustrates this best. While private organizations may not have to abide by the same federal regulations, those of government roles serve to illustrate the kinds of parameters in which salary is often negotiated. There’s a term called labor category requirements. Basically, to qualify for certain positions and salary ranges, you must meet certain labor requirements. Those requirements can be a bachelor’s degree, certification and/or a certain number of years of experience. If you don’t meet the requirements, the organization may not be authorized to pay you at a specific rate.