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What is Salary Negotiation?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 November 2016
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Salary negotiation is the process of establishing a dialogue between two parties, usually an employee and an employer. The negotiations are conducted with the goal of reaching a mutually acceptable agreement on the rate of pay that will apply if one party functions as an employee of the other party. A negotiation of this type may be included as part of a larger negotiation that settles such key points as job responsibilities, health insurance, and general benefits associated with employment. Salary negotiations may also occur as part of the negotiation of a union contract, or when the employee wishes to discuss the possibility of a salary increase.

The process of salary negotiation can be relaxed and casual, or be highly structured. An example of a casual approach to this type of job negotiation would be asking a current employer for a salary increase. This could be done by simply scheduling an appointment with the boss, presenting the request, and providing reasons why the employee believes a raise is in order. The boss and employee discuss the various factors related to the request and hopefully come to a mutual agreement about any changes in salary.

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In more structured situations, a salary negotiation may be conducted through representatives of the employee and the employer. In this scenario, it is not unusual for the employer to present a document known as an offer letter. The letter will state a salary figure that the employee can accept or reject. If the initial offer is rejected, the employee’s agent or representative will respond with a counter offer. In this manner, the two parties continue to seek agreement on a salary increase until one or both parties determine that mutual agreement is not possible. At that point, the salary negotiation is considered to be at an end, and the employee must make the decision to remain with the employer or to seek work opportunities elsewhere.

Rarely does a salary negotiation start and end with one session. For example, with negotiations involving labor unions, there is a good chance that employers and labor union representatives will discuss the matter of salary increases in great depth before any offer is placed on the negotiating table. Even at that point, there is an excellent chance that additional debate will ensue, usually with each side of the negotiation making some concessions in order to improve the chances of reaching a mutual decision that is to the benefit of everyone concerned.

Salary negotiation is sometimes part of the initial hiring process with new employees. This is especially true when attempting to hire key personnel away from a competitor. Rather than presenting a non-negotiable salary amount, the prospective employer will provide a job offer figure that can be accepted or rejected. If rejected, it is possible for the prospective employee to submit a different figure as a counter proposal. This is usually enough to open dialogue that leads to determining the structure of the job proposal, including the salary and benefits that will govern the working relationship.

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