Almost one and a half million new grads will enter the workforce this summer. Graduates with good grades, internships, and job search savvy will often have their choice of job offers. But some of the best and the brightest will flunk their first real world test: they’ll incorrectly assess the economic value of the positions they’re offered.
While students are in college, they typically seek work opportunities that fit their class schedule and pay well. Convenience and salary are the key determinants. But after graduation, there are many other factors to consider. The smart grad will carefully examine issues related to cost of living and benefits, as well as salary. They’ll also understand when and how to negotiate to get the best possible compensation (salary and benefits) package.
Cost of Living
Many new grads head to the bright lights of the city. They know that places like New York and Chicago are expensive, but few know exactly what that means to their lifestyle. Consulting a website like salary.com provides a wake-up call: If you think a job offer of $30,000 in the Research Triangle Park area of North Carolina is too low, consider that you’d have to make almost $49,000 to have a similar standard of living in San Francisco. Perhaps you’re willing to have a smaller apartment, or live in an area that’s not quite as safe. You may even be prepared to eat ramen noodles a while longer. But it’s best to know where and how you’ll need to compromise if you’re determined to go to a particular high-priced location.
Few student jobs provide benefits, so their value is often under-rated. But when you graduate, having good benefits can be essential. For one thing, you’ll most likely no longer be covered for health insurance. And even a small accident or operation like an appendectomy can cost you many months’ salary. If you buy temporary insurance as an individual, a basic policy will cost close to $100 a month, without prescription coverage and with high deductibles. And forget about pre-existing conditions: they’re probably not covered. Check out the health insurance coverage that comes with your job: sometimes it’s fully paid for you; other times you have to contribute. The amount of your contribution can vary significantly.
Graduates often overlook 403B or 401K plans—particularly if they see the word “retirement” attached to them. The fact is, these plans can not only provide a forced savings plan, but also significantly increase the value of your compensation. Many companies will give you a one-for-one match up to a certain percentage of your salary. For example, you contribute 3% of salary and the company will contribute an additional 3% to your retirement fund. Universities and other non-profits are often substantially more generous, requiring you to simply contribute a small percentage of your income in return for as much at an 8% match. That’s the equivalent of getting an 8% pay hike!
Other benefits may be worth a great deal or nothing at all depending on your personal circumstances. If you spend a lot of time in the dental chair or at the eye doctor, dental or vision plans will save you money. If you want to pursue your masters’ degree while you work, be on the lookout for educational benefits. And if you like to keep in shape, be aware that corporate gyms can save you upwards of $75 a month.
New grads, in particular, lament the fact that they no longer have a winter, spring or summer vacation. If vacation time is important to you, check your job offers carefully. You may find you have to wait a year before you can take even two weeks off.
Comparing salaries should be easy. But the figure you’re quoted may include other financial compensation, for example, a signing bonus or relocation funds. Unfortunately, you’ll receive these extras only once. There are two important items for recent grads to consider: your base salary, and when you’ll be eligible for performance-based raises. Some companies start with lower salaries but have six-monthly reviews that can financially catapult you over your peers working for companies where length of service is more important than performance. Negotiating the Compensation Package
If you’ll be one of hundreds of college grads hired for a particular company, you may have no opportunity to change the compensation package. On-campus recruiters, for example, usually have set policies on salary and benefits. And unless you have a “hook”, like having worked for the military for several years before coming to college, it will be hard for you to make a case for why you should be treated differently.
However, the majority of employers do “just-in-time” hiring. In other words, someone has to leave before they’ll even recruit someone new. If you’re offered one of these positions, you may have more flexibility. Follow these steps to increase your chances of success in negotiating a better compensation package:
Identify what benefits are important to you. Know the prevailing salary for someone with your background and experience in the type of work and organization for which you’re being considered. Check salary comparison websites. Better yet, network with someone in the company to find out what people in this kind of position typically make.
Call the organization’s human resource department and ask if there is a salary range for the position. Recognize that most salary ranges are divided into quartiles. Usually new graduate hires will be given a salary in the first quartile of the range.
Check the human resources website for information on benefits. You’ll be surprised how much information you can usually find.
Wait until you’ve been given a job offer before you try to negotiate either salary or benefits. The hiring manager has to be committed to you, before he’ll appreciate these types of questions. You’ll need to ask after getting the job offer if there is any flexibility in the terms of the compensation package.
Recognize that, unless you’ll be working for very small company, it’s easier for management to increase salary, add items like moving expense reimbursement, or give additional days off than it is to enhance benefits like health insurance.
Be professional. Resist pressure to give an immediate answer: it’s perfectly acceptable to thank the manager for her offer, and say you remain very interested, but need time to think about a few issues. Once you’ve agreed to changes or you’ve accepted an offer, don’t go back and try to renegotiate.
Don’t expect that you’ll be able to put an employer on hold indefinitely while you gather job offers. If you’re pursuing other opportunities, it’s acceptable to call those employers and tell them that you need to make a decision on another job offer. Ask if they are in a position to make a quick decision on your candidacy.
Use your resources. Many careers offices welcome calls from new grads who are trying to decide whether to take a particular position, or who want an expert opinion on the relative value of job offers.
Recent grads are often thrown by questions about salary. The first rule of salary negotiation is that the person who states a number first, loses. This is particularly true if you’ll be working in business, but your experience has been in the non-profit world. You can finesse the salary expectations question by saying that you’d expect to be paid the same as someone with similar background and qualifications, or that you’re willing to discuss salary when you’re further along in the process.
The most important thing to remember is that the “sweet spot” time for negotiation is after you’ve been offered a job, and before you’ve accepted it! When employers want you, but they don’t know how much you want them, you’re in the driver’s seat. Use the time to assess your needs, your values and your opportunities.