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Vienna, Austria - Successful salary negotiations must consider the interests of the employees and the company at the same time

Everyone would like more money for the same performance. But the world does not work that way: salary increases are becoming less and less attainable for managers and employees across all industries and age groups. Most companies are under increasing financial pressure and must cut their costs enormously, and personnel costs are especially vulnerable. It is therefore vital to find exactly the right arguments to successfully negotiate a salary increase.

Working more for less

Salaries and social benefits comprise the largest single cost to a company. In production companies personnel costs comprise up to 30% of the total company costs, whereas in service companies they can rise to 70% of the total. So if companies can save money by personnel costs, they will.

At the same time, companies demand more from their employees in many ways. Employees must work more and work harder for the same money – and even a promotion may not bring a corresponding salary increase.

These higher standards are applied to young professionals and university graduates in particular. A university degree may not be enough to get a good job – companies now expect internships, international experience and perfect English.

In addition to this, starting salaries have hardly changed over the last 10 to 15 years and for many graduates are currently in the range of 30,000 to 35,000 euros gross per year. Taking inflation into account, real starting salaries are now slightly lower than they were in previous generations.

Early on, no room to negotiate

The scope for salary negotiation is extremely low for most applicants starting their careers. The inexperienced candidates are easily interchangeable – the company can choose whether to start with a larger or smaller pool of similarly qualified candidates, and can therefore set any fixed and inflexible financial conditions as it wishes. About half of the companies, especially large corporations, have fixed or defined starting salaries, which are not increased for even the best candidates. Most young talent cannot negotiate at all beyond "take it or leave it." Even when there is no fixed starting salary, the difference between the average and the best starting salary is rarely more than 10%. The negotiations for young professionals are therefore reduced mostly to two questions: "How much is the starting salary in your company?" followed by: "When will we be able to renegotiate my salary?"

Bargaining power increases with professional experience

One fundamental principle applies to professional and financial advancement: those who perform better can push for more money. Every employee must therefore ask himself what performance he delivers for his employer and therefore what value he represents for his company, and whether this is reflected in his salary.

The conditions for salary negotiations thus change with increasing experience. With experience, an employer will learn the value and the performance of his employees. Their expert knowledge, professional skills and professional network will make them more unique and therefore harder to replace. Highly qualified professionals and long-term account managers cannot be replaced easily, even with months of searching.

People who have gained unique knowledge and special skills and established strong relationships within the company and outside of it can go into salary negotiations with confidence. Instead of the employer holding all the cards, the best employees start to acquire more bargaining power as they have alternatives on the market.

Salary increase: arguments that count in negotiations

Many common negotiating strategies recommend that employees more or less openly threaten to leave unless they receive a higher income. However, this tactic almost never works out. In the short term, blackmailing superiors might lead to a higher salary, but in the long term this will seriously harm any mutual trust between the employee and the boss.

On the other hand, personnel managers are likely to accept the following two arguments when it comes to increasing the salary of employees in any industry:

1. The employee now delivers a better performance.

2. The employee now has a bigger area of responsibility.

Employees who did particularly well in the previous year and showed responsibility in addition to their usual tasks are most valuable to the company, and are in the strongest position in salary negotiations. Employees and managers should therefore prepare themselves for the negotiations by compiling a list of all outstanding achievements and new responsibilities in advance.

A culture of give and take

If you set yourself the goal of a salary increase, you must have a manager who is willing to grant it. The more confident and enthusiastic a supervisor is about an employee’s work and performance, the more indispensable this employee will become. Performance and salary should be two sides of the same coin. Whether it is the company or the employee who unilaterally gives without receiving adequate recompense, a lack of reciprocity will eventually dissolve the business relationship or build up lasting resentment.

An honest and communicative employment relationship is the basis of a viable professional culture that is characterized by give and take. Nobody can be successful all alone. If you are an employee, you need a boss who promotes and supports you, and if you are the boss, you must rely on the commitment of your employees to achieve success.

The trick of salary negotiations is to simultaneously take into account the legitimate interests of employees and the company and thereby create a culture of fairness, which will motivate both sides in the long run.

About the Author:

Conrad Pramboeck is the Head of Compensation Consulting at Pedersen & Partners. Based in Vienna, Austria, he is responsible for consulting companies on all aspects of compensation, including providing companies with up-to-date market information on salary ranges and design of bonus systems across all industries and geographies. Prior to joining the firm, Mr. Pramböck held several senior positions in international consultancy firms. He started his career with a German Consultancy firm working in management consulting and later in the Compensation Consulting business unit based in Austria. For the following seven years he worked with one of the top Austrian Executive Search firms as the Head of Compensation Consulting. He was responsible for all international compensation consulting activities and developed and maintained an international compensation database in 40 countries.

Mr. Pramböck holds a PhD in Law from the University of Vienna. In addition to his native German, he speaks fluent English and has basic knowledge of French and Spanish.