Hi Leveraged Mamas, today we’re going to go deep into something that has the potential to make a HUGE difference to your lifetime earnings – salary negotiation! In this post you'll find out exactly what the Motherhood Penalty is (hint: it's bad), and how to combat it by improving your salary negotiation skills.
I'm going to bang on a bit about all the reasons why us Mamas need to be super conscious about earning what we are worth, but a heads up right now – you're going to walk away from this post feeling positive and I'm going to give you some tools to improve your financial outlook! So jump on in a let's crack on with the detail…
Photo by Bruce Mars on Pexels.
Celebrating International Women's Day
This post is part of the #WomenRockMoney collaboration – a collection of inspirational posts from over 40 other women business and money bloggers, about how to achieve success and improve your finances. Collectively, we are celebrating International Women's Day and I challenge you to share a way that you'll improve your financial position this year, with the hashtag #WomenRockMoney.
For my part in this collaboration, I'm going to help you beef up your salary negotiation toolkit! Even if you think you’re pretty good at this – please, read on – there might still be a few tips and insights for you.
Just like getting out of debt, being able to negotiate your salary well can mean many thousands of dollars either in OR out of your pocket over the course of your lifetime.
Stating the obvious here, good salary negotiation leads to more income. More income makes it easier for you to help provide for your family. More income also helps you provide better for your future self – your future retired self.
Having more income will also allow you to put away more money to provide for you if you’re out of action for any reason. And so many other reasons – so let’s do this!
Why Mamas need to save more for retirement
Recently Amanda Morrall from Simplicity came in and spoke with the women’s network in my workplace. She spoke to us about why women need to save more for retirement (you can hear her talk about similar topics here), and some of the traps that reduce our overall income, and therefore – our retirement savings.
Those traps include:
- The gender pay gap (which is real!)
- Lost income due to maternity leave
- Part time work after returning from maternity leave.
And you guessed it, these factors all work against us in terms of our total lifetime earnings, which is a direct hit to our retirement savings – unless you consciously and directly manage this.
I know you'll agree that it's important to earn what you’re worth to support your current lifestyle – making it easier for you to repay your mortgage, put food on the table and provide options for your families.
But it's also critically important for income once you’ve retired and can no longer work. The more money you have been able to save for your retirement, the easier it’s going to be.
Unfortunately, if you’ve been consistently paid less than you’re worth for many years – in part because of poor salary negotiation experiences – the negative effect is compounding.
And if you remain in the same job for many years, you can only justifiably ask for ‘so much’ every year, and you’re only building on your current salary.
So, you need to negotiate your salary well, every year, to continue being paid what you’re worth, and not less.
You want to get it compounding in the right direction, and it’s never too late to change things (but the earlier the better).
The Motherhood Penalty – a real clanger for mamas
But here comes the clanger… sadly, as mothers we don’t just have the gender pay gap to worry about – we also have what’s called, the ‘Motherhood Penalty’.
Here is a graph from a study done in Denmark, showing that a woman’s wage rates never seem to recover fully, after children.
You might look at the graph above and think – well, mothers are earning less as they're taking time off for maternity leave, then some are returning to work part time. And yes that seems to contribute, but what you can also see in the graphs is that the hours worked don't directly correlate to the earnings – in other words, that's not the only reason they are earning less.
But that's not all… in New Zealand, if you’re a mother, the gender gap is significantly more than your female peers with no children (from Statistics NZ).
And in the U.S. (from The Motherhood Penalty and the Fatherhood Bonus):
So as you can see, the cards are really stacked against us Mamas, and our lifetime earning potential.
And if the gender pay gap and the motherhood penalty aren't enough… there's just one more stinker that we ALL have to deal with… and that is inflation.
Inflation around the world
Inflation reflects the rising cost of goods and services in a country, represented as an annual percentage change.
Here are current (2017) inflation rates for a sample of countries:
[pricing_table columns=”4″] [pricing_table_column title=”US” price=”1.79%”][/pricing_table_column] [pricing_table_column title=”UK” font-family=”Open Sans” price=”3.1%”][/pricing_table_column] [pricing_table_column title=”NZ” price=”1.7%”][/pricing_table_column][pricing_table_column title=”Australia” price=”2.1%”][/pricing_table_column] [/pricing_table]
What this means is that the cost of things – the cost of living – rises steadily at about the rate of inflation every year.
If your salary is not rising at least at the same rate as inflation, then your expenses are going up but not your income, which means less money in your pocket.
For example, if you live in New Zealand and your income didn't increase by at least 1.7% in the past year, then your expenses increased but not your income to (at least) match.
That’s kind of like a pay DECREASE.
That doesn't mean you should panic!
I'm aware I have a slightly more optimistic view than most people, so I should point out that there's no need to panic 🙂
All this means is that it is even more important that we learn to negotiate our salaries well.
Don’t doubt yourself – you need a pay rise!
But this is where the problem begins. Women can sometimes be are terrible negotiators!
“Happy to have a job at all”
Sometimes, dare I say, we are happy just to have a job.
Case in point… before I returned to work after maternity leave, I had some confidence issues – I wondered if I had forgotten everything I knew (seriously), and worried that I wouldn’t be as focused and efficient with ‘baby brain’.
The reality was totally the opposite! Every hour I spent away from my young baby was time I wanted to spend well -so I did. I was highly focused (too much so…)
But sadly, because of my lack of confidence after leaving the workforce temporarily to have a baby, I accepted an offer for less than what I was previously paid.
So I too inadvertently suffered from my own version of the motherhood penalty.
But it doesn’t seem fair, does it – why should you be paid less just because you’re not good at negotiating your salary?
Yet in reality, having poor salary negotiation skills DOES mean that you will be paid less, unless you have an epic manager who is in your corner batting for you regardless.
That is rare, sadly.
Getting paid what you’re worth in your current job
Ok ok, let's get on with the tips already! Starting with – getting a raise in your current job.
If you want to negotiate your salary in your current job, first you need to be super clear about what you need to do to be considered for a pay increase.
There are many degrees and similarities in how an employer decides who gets a raise, and how much – you need to be clear on what is expected of you, by your employer.
- Make sure you’re having regular meetings with your manager to discuss your progress.
- Ask for clear feedback on what you can do to add more value and meet your targets.
- Ask for support if you are not equipped to meet the targets set, so that they are achievable.
What is being measured?
You may need to think about what you contribute to.
For example, in some workplaces, your performance can be directly assessed against the amount of money you have brought it – so it could help to work on initiatives that have a high dollar value.
In other workplaces your job may have a direct impact on customers, so applying yourself in your service to your customers may be of high value to them.
In yet other workplaces, getting exposure can make you appear more favourable.
But in some workplaces – perhaps smaller – it may be as simple as setting goals one on one with your manager, and meeting them.
Whatever your situation, you need to be able to demonstrate your success. This means finding out what the required metrics are ahead of time, and ensuring you can demonstrate your success using these metrics when the time comes.
When your performance is reviewed, you can present the agreed goals you were working towards, and demonstrate how you have exceeded their expectations.
Keep an ongoing track of your progress – small wins, comments and feedback from internal and external sources – so that you're not grasping at straws trying to think “what have I done to deserve a good review?” – just before review time!
Revisit these goals yourself, regularly. Make it your business and your responsibility to do this – it could just mean the difference of thousands of dollars over your lifetime, remember?
Don’t just expect to be handed a great performance review on a plate – show your employer WHY they have no other choice but to reward you!
You need to make it really, really difficult for your employer to refuse you a raise.
I think you'll agree on what the biggest takeaway is here:
Ensure you understand what you would need to achieve to be considered for a pay increase, then map out an agreed plan to meet these goals. Meet regularly to review – both your progress, and to check that your goals are still aligned with the company’s.
Getting paid what you’re worth in a new job
The biggest chance you actually have to increase your income is when you move jobs. It’s just not likely that you’re going to get that kind of increase in your existing role.
When going for a new role
Do your research. What is the CURRENT salary range for the role? Don’t rely on memory from past times – find out what the going rate is today. Talk to recruitment agents – who will always try to get the best rate as it affects their commissions.
When asked your salary expectations, add 10% more on top of what you would be happy to accept.
For example, if you would like to be paid $100k, ask for $110k.
Remember – it’s a negotiation.
Start high – set the anchor
A skilled recruiter will always ask you what your expectations are FIRST. (I think) this is because many of us are crap at understanding our own worth. So you put a low figure on the table and they accept it with a small fist pump in the background!
This is actually called anchoring, and the first number stated sets the anchor. In a salary negotiation, I think you'll agree that starting with a higher number is better.
So sometimes, it could be helpful to put a higher figure on the table to start negotiations.
Setting a high anchor this can help achieve two things:
1) It shows your confidence.
2) It starts the negotiating higher.
If they really want you, they will come back with either a yes, or a lower number.
The higher you start, the higher you can go the following year, and so on. It compounds.
Don’t sell yourself short.
How much is too much?
What the employer is prepared to offer you will depend on many things: if there is a range dictated for them to work within (pay scales or grades); what other team members are being paid; and their assessment of your skills, experience, and aptitude.
Again – do your research. Know CURRENT market rates for your role and experience level .
Understand your place in the candidate hierarchy (were you head hunted or did you apply cold? How many other candidates are there?
TIP – if there are high performing individuals or the company attracts really great employees, the overall salaries may be higher. Do your research!
Weigh it all up for yourself
You do need to weigh things up for yourself though.
If you’re in a situation where you’re applying for a role that many people could fill easily, then asking for top dollar may make you a less desirable candidate.
But at the other end of the scale, say, if you’re been head hunted specifically for a role because of your unique set of skills and experience – you may have more leverage.
Either way, if they really want you – they will enter into a negotiation with you. If they really think you are a great fit for their company, they will negotiate with you.
If they come back with a flat no – at least you have your answer! Perhaps, they will agree and you’ll have an extra 10% in your pay packet each month!
Once you've received an offer, ask for the specifics of the offer in writing so that there’s less chance of misunderstanding. Always get the offer in writing with the exact benefits, perks and incentives outlined.
If you decide that the offer is lower than you are happy to accept, tell them this. Let this hang in the air and see if they come back to you with a higher number, or ask if they can offer you an increase in other perks (for example, increasing the amount of superannuation that your employer matches, or granting you an additional week’s paid annual leave, etc).
Jot it down and let them know you’ll come back to them – be effusively thankful.
Then do the numbers so that you understand how much this actually equates to – remember, you don’t want to be quibbling with them over a few hundred dollars (it’s not ALL about the money, after all, right?).
Then it’s up to you – accept or decline.
If you accept, ask them to put the details in an email so that you have it on file.
If you decline, be ready for them to accept your refusal! This is not a bluff!
And remember: you haven’t accepted an offer until there is an acceptable offer on the table!
What do you have to lose?
You do always have to ask yourself – what do you have to lose?
If you badly want the job and there is no other job that would make you happy, perhaps your risk tolerance will be a little lower.
But if you would be ok with walking away from the job – aim high.
Share your tips
I'd love to hear your tips on salary negotiation in the comments. Have you had a great experience, or a bad experience negotiating? What wisdom can you pass on to other Leveraged Mamas?