How to Negotiate Salary and Improve Compensation Conversations

Two in five salaried workers in the US haven't received a raise in the past 12 months, according to our 2024 compensation trend report. And 29% of US employees don’t expect a raise in the next year.

Avoiding salary conversations—whether due to discomfort, uncertainty, or fear of rejection—can affect your workplace morale and overall job satisfaction. If you're an employee preparing to discuss compensation or a manager being asked for a raise, we understand these conversations can feel uncomfortable. If you’re attending job interviews, you may not want to raise the subject of salary in case it looks like you're just there for the paycheck.

However, avoiding the subject and not negotiating salary means maintaining or increasing pay gaps, which results in potentially unhappy employees. Transparent employee compensation can help close pay gaps and increase productivity and employee satisfaction. Having respectful, tactful, and productive salary conversations shouldn’t feel impossible.

Follow the recommendations in this guide to streamline compensation processes, have positive compensation conversations, and highlight what to ask during a compensation discussion.

What is desired compensation?

Desired compensation covers all elements of compensation, including salary and benefits. Total compensation encompasses:

• Retirement savings (pension, 401(k), or Roth plans)
• Paid vacation time
• Healthcare and other insurance (life insurance, dental, and private medical insurance)
• Parental leave
• Sick pay

Total compensation considers the full compensation package you’re offered, which is more than just salary. Your desired salary is how much you want to be paid for your role. It does not consider any other benefits.

HR’s role in salary conversations

HR teams can be a part of the solution to making compensation conversations more comfortable. They can play a vital role in preparing employees and managers for salary negotiations by helping set ground rules for these conversations and ensuring managers have the resources needed to conduct them.

How to decide annual compensation

Employee compensation is generally skill-based, competency-based, or performance-based. Your organization will need to establish which system is right for you:

• Skill-based pay: Generally used in jobs that provide a career path based on increasing technical skills rather than moving up the management ladder. These skills are measured by assessments and certifications.
• Competency-based pay:  Based on an employee’s skill set, knowledge, and experience rather than their job title or seniority. This system encourages employees to contribute to the company by improving their skills.
• Performance-based pay:  Determined by how well an individual, team, or entire company performs. This system is often used in association with sales or to determine bonuses.

How often should there be employee compensation conversations?

Your organization should have an established schedule for evaluating employees’ compensation. Many companies conduct annual performance reviews to ensure salaries reflect current market value and their growth and development over the year.

Depending on your industry, it may feel appropriate to conduct salary reviews more or less frequently. Employee anniversaries are a great place to start and an easy way to stagger salary adjustments throughout the year. Employees also shouldn’t be restricted from asking managers about raises whenever they feel appropriate.

How to prepare employees for compensation conversations

Once you’ve established how often managers should discuss salary with employees, you must ensure they have the tools and skills to conduct these salary conversations. And it’s better to be prepared—as 54% of Americans revealed that they’re unhappy with their pay because they don’t earn enough to pay their bills, according to Pew Research Center.

Many companies prepare managers using comprehensive training and role-playing various scenarios. This training helps managers understand what’s appropriate to discuss during compensation conversations, how to prevent contentious situations, and whether a conversation must include HR.

When having compensation conversations, managers should:

• Be clear and concise when delivering communication.
• Be empathetic. A pay review where you can’t offer a desired raise can cause mixed emotions.
• Be prepared for questions and pushback on the decision.

Salary negotiation tips for job seekers and employees

John Meese, Executive Creative Director at BambooHR (and manager to 29 employees), reminds us there’s no need to be nervous walking into a salary conversation.

For any conversation surrounding compensation as an employee, it’s always best to be prepared. Whether you’re negotiating salary, asking for a raise, or discussing a bonus, walk into the conversation prepared to state clearly what you’re asking for and why you think you deserve it.

Salary negotiation best practices for job seekers

For job seekers, you’ll likely be asked about your desired salary at some point in the interview process. Don’t be caught off guard when your interviewer asks.

Our guide on negotiating a higher starting salary goes into more detail, but here are three key points to consider:

Know your value

It can be hard to know your market value if you’re changing cities, positions, or careers for a new job. Take a moment to consider how your experience and skills match up against other candidates and what benefits you can bring. Salary calculators on sites like Glassdoor and Payscale are also a good tool to use with short surveys you can take to find a general range for how much others with your experience, in your area, and a similar position are making. This range should give a good baseline of where to set your salary request.

Give a range

Rather than give a specific number, you can provide a salary range for the employer to consider. Once they return with a number, you can negotiate salary. During salary negotiations, cite market research and evidence of your skills that support your claim on fair pay for the position.

Take your time to review what the employer is offering

Once you have a salary offer from the employer, take some time to digest this and research if it's fair for the role you applied for and the industry. Take a couple of days, and go back with a counteroffer if necessary.

Bonus: Ask questions

You may have an idea of how much you’ll be paid. But do you know when you’ll be paid or in what form? And compensation isn’t just your salary. Will you get work benefits, bonuses, or equity in the company in addition to your paycheck? Be sure to ask questions during the interview or negotiation phase so you know what to expect as an employee.

Raise negotiation best practices for employees

You hold a few more cards when interviewing for jobs than you do as an employee seeking a higher salary, so you may have to be a bit more conservative when asking for a raise.

However, that doesn’t mean you shouldn’t ask for what you deserve. You should have a clear reason why you deserve a raise. Some points you may want to include are:

• My responsibilities and/or skill levels have increased since we last discussed my pay.
• Others at the organization are doing the same work and being compensated more.
• Others in my industry are being compensated more.

Dive in

Set expectations upfront with your manager that you’re requesting a meeting to discuss your salary and dive in with your prepared points. Beating around the bush or burying the compensation question inside another conversation can leave you and your manager confused and dissatisfied with the discussion.

Choose your timing carefully

You can typically ask for a raise at any time, not just during your annual or quarterly performance review. However, it’s a good idea to check the policies in your business. Some companies have strict windows throughout the year when pay can be increased.

But if you can negotiate, consider your timing carefully. If you just nailed a huge presentation or delivered particularly stellar results, it may be time to make your move. But if you recently made errors on a big project or turned in multiple assignments late, it’s probably not the best time to ask for a raise.

Be specific

“Come prepared with what you’re asking for,” says Meese. “Don’t come with a general ‘I need more.’ You have to make your case. The case is a combination of, ‘This is the work I’m doing for us, this is some of my past performance, and these are some of the projects I’ve done.’”

Focus on accomplishments you’ve achieved, skills you’ve acquired since your last salary or compensation adjustment, and ways you’ve impacted the company. Unfortunately, personal reasons aren’t appropriate causes to ask for a raise.

Prepare a response

Even if you show up with evidence and confidence, you still might not get the raise. If that’s the case, will you accept it and move on? Will you start looking for employment elsewhere? Whatever you do, be prepared to ask your managers some questions like:

• What do I need to do to earn the salary I desire?
• Can we review my salary again in six months or a year?
• Are my career goals possible at this company?
• Is a one-time bonus more realistic than a raise?

“No matter what you do from an employee perspective, if your request is turned down or accepted, stay humble about it,” says Meese. “Always be gracious to maintain the best relationship.”

Maintaining a positive professional relationship is important, no matter the results of the conversation. That means you shouldn’t storm out if you don’t get what you want, and you should remember to show appreciation if you do.

Salary negotiation tips for managers

Good managers should be trained to have productive and clear money conversations with their employees. Managers must prepare talking points when entering salary negotiations, just like employees do.

Give context

It doesn’t matter if you’re offering a raise or denying a request—you need to give your employee detailed information to back your decision. When employees are disappointed by a response, it’s usually because they don’t know or understand the context of the decision. Be clear about how decisions are made regarding promotions, raises, and bonuses, and don’t over- or under-promise on any expectations to your employees.

Ask questions

Your employees probably have big career goals—do you know what they are? You can’t do much to help them if you don’t. Even if you can’t offer employees the raise they’re looking for right now, you can help map out their career trajectory at your organization. This will help them know when to expect a raise or bonus, what opportunities are available, and how they can meet the skill and performance requirements for those goals.

Check-in

Don’t let one conversation be the end of your discussion. If an employee got a raise, ask them if it’s reflected in their paycheck to ensure the changes were made correctly. If you decided against a raise or made a different compensation plan, make sure they feel like a valuable part of your organization and that their work is appreciated.

Follow the golden rule

Everyone has a boss, so treat your employees with the same respect you want to receive when you discuss compensation with your manager.

Why is pay transparency important?

Pay transparency is openly communicating salary information with current employees and job candidates. Increased transparency can lead to greater equity and employee empowerment. While pay transparency is becoming more common, talking about pay still seems uncomfortable for many.

Pay transparency can be interpreted differently across organizations. At Whole Foods, staff members can look up any employee’s salary and bonuses—even the CEO’s—from the previous year. San Francisco-based tech company Buffer takes pay transparency to the next level by making all employee salaries available online for anyone.

The risk of finding out you’re paid less than your peers might be enough to scare you away from asking in the first place. But knowing what others in your industry are making can help you feel more confident that you’re being paid appropriately or help encourage you to ask for more.

Handle your next salary negotiation with confidence

Talking about money doesn’t need to be scary. Hopefully, whether you’re a manager, employee, or job seeker, you’ll feel more at ease during compensation conversations with the help of these tips. If you do your research and are prepared, you should have the confidence to have a constructive and respectful conversation, whatever the result.

Whether you're negotiating a salary, managing team compensation, or setting company-wide pay structures, BambooHR makes it easier to navigate these conversations with data-driven insights, streamlined compensation tracking, and HR tools designed to support fair and transparent pay practices. Take the next step toward stress-free compensation discussions with BambooHR today.