The 20/30 Rule of Negotiating Your Salary
Day in, day out, I do what I do best — headhunting professionals. And in my many years in the talent acquisition industry, I have come to learn that the good ones are often employed. One can argue that there are talents that are good yet unemployed, but if they are really good, why are they not employed? Good employees are usually the ones companies have a hard time letting go, even during the pandemic. If you are that person, then you have very, very strong leverage. A kind of advantage that you can bring with you during job negotiations and is one of the most important ammunition you can use when a company is trying to convince you to transfer. The question is, how do we use that leverage when it comes to salary negotiations?
Salary negotiations are tricky. Some are wary of sharing their salaries, while others will demand how much the pay really is so they can max out the budget of the employer. For the sake of this article, I’d like to focus on a more grounded and realistic approach with your personal historical salary as the basis. In my more than a decade of experience in headhunting professionals, from rank and file, supervisors, managers, senior managers, and C-levels, I was able to come up with a salary formula when it comes to convincing someone to transfer — the 20/30 rule, a strategic salary negotiation rule that I use to manage the expectations of both the applicants and the employers.
For example, you’re a manager earning P50,000 a month, and I’m trying to convince you to transfer. If I offer you a 10% increase or P55,000 per month, will that be enticing enough for you? For your information, the average annual increase is around 3-5%, while the latest Salary Budget Planning Survey report by Willis Towers Watson last March 2021 projected that pay rises in the Philippines this year will be at an average of 5.6%.
Going back to that 10% increase offer, if you stay in your company, you’ll get at least a 5% increase and, if you’re good, you will probably get that 10%. So with that amount, 10% doesn’t sound so appealing right?
Now, let’s make it P60,000, a 20% or P10,000 increase from your current P50,000. We can further bump it up to P65,000, a P15,000 increase. With such an offer, now we’re talking. Now you’re interested.
If employers ask you about the rationale behind the 20 to 30 percent increase, this is where your leverage plays a huge part. Basically, with your current employment, you're secured, comfortable even, but when you decide to transfer companies, there's this uncertainty that you may not fare well in the other due to many factors like work adjustment, culture fit, performance, and organization dynamics. Therefore, for the sake of the risk that you're going to take, the 20 to 30 percent increase will serve as a premium.
If you’re an employer, don’t think that a professional with a skill level of P50,000 will transfer to your organization with the same package. Most likely, your budget will attract someone from the P40,000 skill level who's looking to advance their career.
Does the 20/30 rule work? If you don’t have leverage, which can be as simple as being employed, then you won’t be able to negotiate. The successful negotiation of a higher salary requires a candidate to do so from a position of strength. So, if you are unemployed, a 10% increase might be doable. But if you do have leverage and you were able to make the employer understand the premium for the risk you are taking, then yes, the 20/30 rule is more likely to work.
Can you go beyond 30%? Yes, you can talk you’re way into it, but a word of caution, going beyond 30% might overinflate your worth and expectations might increase significantly. It would be a risky move as your performance may end up not being at par with the expectations of the employer. As they say, you might have won the battle, but you lost the war.
To sum it up, the 20/30 rule is all about the premium for your risk. Remember that success in company A does not guarantee success in company B. Transferring to another company always means risking the security and comfort level that you get to enjoy in your current company. So, negotiate wisely.