There are many opportunity to negotiate a new compensation structure. This happens every time you change companies, but also when you change roles within your company or decide to ask for a promotion or a raise.
There are a lot of areas to be considered when negotiating compensation, including bonuses, profit sharing, stock incentives, and of course base salary. Because of the complexity, it’s easy to get overwhelmed during the negotiation process.
How can you evaluate which combination of all of these factors will be the most lucrative for you, not just now but 5 years down the road?
I’ll make it easy… In almost all cases, base salary trumps other types of compensation in terms of long term importance and value. If in doubt, always negotiate for an increase in base salary above all else.
Here are 3 big reasons why base salary is the most important factor to consider when negotiating:
1. Bonuses are usually a percentage of your base salary.
Having a higher base salary will also improve your bonus in most companies. This doesn’t work in reverse: negotiating for a better bonus structure will do absolutely nothing for your base salary.
2. Base salary implies seniority and market value for a candidate.
Job titles vary from company to company. Because of this, hiring managers and recruiters often use base salary as an indicator of level when comparing you to peers within your industry.
Every month as a recruiter, I see at least one job candidate miss out on an interview because they were deemed too junior for a position due to their current base salary. Their resume was fine. Their amount of experience was fine. But the hiring team still felt the candidate must be lacking something if they’re only making xxx amount at their current company. Like it or not, you need a strong base salary if you want to be considered for higher level positions in the future.
3. Other incentives are less likely to carry over into future job offers.
Companies have predefined salary bands that are used as general guidelines, but there is usually some room for negotiation. It’s less common for a company to be flexible when it comes to bonuses and other incentives.
All the hard work and time spent negotiating for a better bonus at your current company might not translate into future job offers. I see this happen frequently with vacation time as well. Most companies don’t care if you negotiated for 5 weeks of vacation in your last position; you’re going back down to 2 or 3 weeks like everyone else if you accept the new job. If you negotiate for base salary, however, you can often get a slight increase with each job change (10% is typical in my industry).