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Negotiating Salary in a Recession

Negotiating Salary in a Recession

It may be summer, but it’s cold out there: Thousands of companies of all sizes have frozen hiring and salaries, putting many workers’ earnings expectations on ice for the time being.

But many employers continue to make job offers even as they reduce overall headcount. More than 4 million hires were made in April 2009, according to the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics.

So what’s it like to enter a salary negotiation in these gloomy times, and how can you make the best of a bad situation? Let’s take a look at the frigid compensation landscape and then get some expert advice on how to navigate this terrain.

Pay Freezes, Reductions, Uncertainties Abound

Salary trends in 2009 are dismal, but not uniformly so.

Whereas professionals in marketing, finance and sales are suffering declines in pay, positions in manufacturing, information technology and engineering are showing modest increases of up to 2 percent, according to Mercer’s June 2009 Market Pulse Report.

About one-third of companies covered in the Mercer report are projecting salary freezes for 2009, a powerful show of cost containment. But a Watson Wyatt survey indicates an even larger shift: Companies reporting salary freezes rocketed from 4 percent in October 2008 to 60 percent in April 2009; firms reducing pay jumped from 2 percent to 21 percent over the same period.

Whether corporate workers will be made whole in the long run is an open question, according to the Watson Wyatt report. Of responding employers that have cut pay, 37 percent say they will eventually reinstate salary levels and build from there; 19 percent say they’ll permanently retrench and build on current, reduced salaries; and 44 percent say it’s too soon to decide.

Recognize the Realities of the Recession

Before you take your seat at the negotiating table, consider what you’ve got going for you and what you don’t. Given the severe recession, “candidates need to be cautious about how demanding they are in negotiations,” says Susan Haberman, Mercer’s US regional leader for information product solutions. No matter what your house payment, many employers simply can’t pay you more than they are offering.

But if you’re negotiating from a position of strength, there may be hope. “The fundamental dynamics of negotiation haven’t changed -- your leverage has changed,” says Robert Hellmann, a career coach and adjunct professor at New York University's School of Continuing and Professional Studies. “Can you walk away from the opportunity? Can you be easily replaced? Have other things in the works so that you can walk away.”

How to Make Your Case

In these times, should you consider a salary offer or raise to be final? “It couldn’t be easier: You pretty much just say yes,” says Athar Siddiqee, strategic client services executive at, which powers’s Salary Wizard.

But even with more qualified candidates on the market than usual, “a significant number of people are counteroffering, but they’re not nearly as aggressive as they used to be,” Siddiqee says.

Don’t be afraid to make the business case for a higher number, says Ford Myers, author of Get the Job You Want, Even When No One’s Hiring. “Tell a lot of accomplishment stories backed by quantifiable results,” he says. “Show that you understand the employer’s needs and challenges, and think ahead of time about proposed solutions.”

If a final salary offer comes up a little short “but it’s a good job with a great company, consider asking for an accelerated performance and salary review in six months,” Myers says. “Be sure to get a specific offer of future consideration in writing.”

Don’t Short-Sell Yourself

Keep in mind that in good times and bad, top candidates for critical positions are in demand. “It isn’t worth it for a company to nickel-and-dime you and lose a good candidate,” Siddiqee says.

When will labor-market conditions improve for workers at the bargaining table? “Based upon our conversations with clients, we’ll continue to see organizations be extraordinarily conservative through 2009,” Haberman says. “In 2010, we may see increases at a modest level.”

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