Should You Use a Job Offer to Negotiate a Raise?

December 14, 2012

talking about job offerUsing a job offer to negotiate a raise from your current employer is hardly an unusual strategy. Some employers won’t give a significant raise unless they’re forced to by the prospect of an employee leaving. But if you do use this strategy to negotiate a raise, be aware of the risks involved and do what is necessary to minimize them.

Get the Offer in Writing

Never attempt to use a verbal job offer as leverage in salary negotiations with your current employer. If you can’t get the offer in writing, you don’t really have any bargaining position. In fact, you may not even have a job offer! Don’t risk your current job for a verbal offer that can easily be withdrawn or even denied after the fact.

Make Sure the Offer is Reasonable

If the offer you receive is better than what you’re being paid on your current job, you’re going to have to do some more research to make sure that it’s reasonable. This is especially true if the offer is much higher than your current pay.

Check sources such as Salary.com and the Bureau of Labor Statistics (BLS), Occupational Employment Statistics to see where the offer fits in the pay range for your occupation. Be sure to compare the pay level to the range in the area where you live, as this can vary from one region to another.

If the salary offer appears to be too generous for the normal range for your position, be careful – several scenarios are possible:

  • The employer may be paying above average salaries to offset high turnover in the position, poor working conditions or high levels of employee dissatisfaction.
  • The expectations for the position may be exceptionally high, even impossible to fulfill.
  • The employer may be looking to pirate talent from their competitors, and one of the best ways to do this is by throwing a lot of money at them. But the strategy is aimed more at hurting competitors than it is at bringing in contented employees.

You may be lured away from your current job to one that isn’t exactly what it seems, and you’ll be a short-timer if you take it. That being the case, you may be forcing your current employer into a bidding war based on a salary that isn’t quite as real as it appears. In addition, the salary offer may be so far out of bounds that your current employer may opt to not match it.

Don’t Do it if You Aren’t Prepared to Take the New Job

You have to be fully prepared for the possibility that your current employer may not make an effort to retain you in the face of an offer from another company. Here are some of those possibilities:

  • Your employer is not satisfied with your job performance.
  • Your employer may not be in a position to match the offer.
  • Your employer may have a policy – written or unwritten – in which they refuse to make counter offers.
  • Some employers view employees applying for positions at other companies to be an act of disloyalty, and refuse to negotiate.

With of these possibilities in mind, you must be prepared for the very real prospect that you will have to accept the job you applied for. If you don’t intend to take the job, and your current employer does not counter the offer, you could become vulnerable in your present position. Your employer may see your use of an outside offer as merely an attempt to get a raise.

Negotiating With Your Employer

If you do have a written job offer, and it’s a legitimate one with a company that you would like to work for, you are in an excellent position to seek a counter offer from your current employer. It may not be a bad idea to combine the job offer with printed copies of your online salary research. The combination will give you solid documentation to show your employer that you’re worth more than they’re paying you.

If you try to call a meeting with your boss, your boss’s boss and someone from the human resources department they may see it as setting up a confrontation. Start with your boss alone and keep it informal. Your boss will have a good idea as to whether or not the company will attempt to renegotiate your salary. It can go up the chain of command from there.

You’ll want to be as diplomatic as possible in approaching your employer and presenting your documentation. You might start by saying something along the lines of, “XYZ Company invited me to come in for a talk. We went back and forth a few times and they made me a job offer. It’s a solid opportunity with an excellent salary. I really like working here, but it’s hard to ignore the higher pay. Is there anything we can do to close the gap?”

Give him the written offer only after you have first explained the situation. This will avoid you appearing to come on too strong. At this point try to judge your boss’s response. If he is sympathetic, then do your best to make him your ally in the process.

Hold off submitting your online salary information until the process moves up the ladder. At that point, it can help strengthen your boss’s attempt to get a counter offer in process.

You Can Only Do it Once

You may be completely justified in using an outside offer to get a salary increase. In the competitive business environment we’re in, employers are often reluctant to give out significant raises unless it’s absolutely necessary. But your employer may see your use of this strategy as an attempt to force their hand, which really is exactly what it is.

For this reason you will probably only be able to use the strategy once with your current employer. If you try to do it a second time, the employer may simply wish you well and say goodbye.

Have you ever used an outside job offer to negotiate a raise? Leave a comment and let us know!

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Kevin

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Kevin
Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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Comments

3 Responses to Should You Use a Job Offer to Negotiate a Raise?

  • Joe Cassandra

    Interesting take Kevin, definitely be prepared to take the job, I know in some companies they are very old-fashioned where if they know you are looking around, you’re automatically labeled as one with his “foot out the door” and could only hurt anymore chance at the company.

    You got to feel out what type of company it is. A newer company (like a tech e.g. google or whatever) would more likely see it as a normal practice.

    Feel out the company first! cheers!

    • Kevin

      That’s very well put Joe. It all depends on your company. It may be best to be fully prepared to leave rather than to use an offer to get a raise.

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