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10 Factors That Influence Salary Negotiation for Software Engineers

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Team Interview Kickstart

Salary negotiation is a skill. Software engineers gunning for roles at big tech companies must equip themselves with some smart negotiation strategies to land an offer that matches their value. 

So, if you are preparing for a tech interview, check out this salary negotiation e-book to get interview-ready! Having trained over 9,000 software engineers, we know what it takes to crack the most challenging tech interviews. Since 2014, Interview Kickstart alums have been landing lucrative offers from FAANG and Tier-1 tech companies, with an average salary hike of 49%. The highest ever offer received by an IK alum is a whopping $933,000!

At IK, you get the unique opportunity to learn from expert instructors who are hiring managers and tech leads at Google, Facebook, Apple, and other top Silicon Valley tech companies.

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To successfully negotiate and achieve your target compensation, it’s important to understand the different factors that influence offers and negotiations. That’s exactly what we’ll cover in this article:

  1. Salary or Pay Band 
  2. Levels 
  3. Location
  4. Interview Performance
  5. Experience
  6. Skills
  7. Competing Offers
  8. Company Brand
  9. Your Value
  10. Current Salary

1. Salary or Pay Band 

A salary or pay band is the range of salary a company offers for a specific role or level based on market and internal value for talent. It indicates the minimum and maximum amount a company will offer for a particular role at a particular level.

When negotiating compensation, ensure your target pay lies at the upper end of the salary band. Research salary bands for your prospective role at your target company. You can glean this information:

  • Online, from sites that collate salary data in the tech industry, such as levels.fyi and Blind.
  • Offline, by talking to recruiters or employees from the same company or similar companies to get a more accurate estimate.  

In some states (California, for one), companies are required, by law, to disclose salary bands for prospective levels when requested by candidates. 

In some cases, candidates have been known to negotiate offers above prescribed bands. This happens when a higher authority in the company approves a candidate’s counteroffer for a higher salary.

2. Levels 

Levels are the most critical factor in determining compensation, especially for senior-level positions. A candidate’s level is often determined at the end of the interview process. Every level has a defined salary band. Candidates with specialized skills or deep expertise, especially for hard-to-fill positions, can command top-of-band salaries or premiums on salaries.

Salary bands for successive levels tend to overlap. For example, if the salary band for Level X is $150k-180k, it may be $170k-200k for Level Y. 

Sometimes, companies peg candidates at lower levels because you can earn a higher salary in the upper band of a lower level than the lower band of a higher level. 

However, compensations increase exponentially with every promotion at senior levels. But promotions also take longer to achieve at senior levels. So, always try to join at a higher level to improve your future earning prospects. 

Since every company levels differently based on roles and responsibilities, try to ascertain the level you should be hired at before you receive an offer. Understand how your skills match up to the level offered and negotiate accordingly. FAANG companies don’t typically negotiate levels and don’t ordinarily uplevel candidates. However, you can compare offers from different companies based on levels to ascertain the best offer. 

3. Location

Companies tend to compensate based on the cost of talent available in a particular location. San Francisco Bay Area, Seattle, and New York have the highest-paying tech jobs. Given how competitive salaries are at these locations, you can earn a $500k compensation at a lower level with less experience. 

The average compensation for a software engineer with over 15 years of experience at Amazon, San Francisco Bay Area is $200,000 vs. Amazon, Ohio at $118,000. One way to land a $500k compensation is to relocate to a location that has a high concentration of companies offering high-paying tech jobs.

But note that compensations are relative. Considering the cost of living expenses and taxes in these areas, a $500k job in these locations is probably the equivalent of a $250k job at other locations, and vice-versa. Consider the range of salaries offered in your preferred location. If you’re more competitively placed compared to local talent, try to negotiate your offer upwards.

Alternatively, consider relocating to areas where talent for the role you’re interested in is low in supply. If your skills are in demand in these locations, you can leverage this to negotiate higher compensation.

4. Interview Performance

Your performance at every stage of the interview process goes a long way in determining the level you’ll be hired at and is a key driver for compensation at FAANG companies. Since levels are based on roles and responsibilities, displaying a high level of expertise during your interview can see you slotted at a senior level.

At the interview, perform in line with the requirements of the prospective role. Proper preparation for the interview will ensure this. Study the job description thoroughly and demonstrate skills and knowledge in line with it during the interview. 

For senior roles, your performance in the system design and behavioral interviews will be considered the most. If you’ve performed well at the interview, use this as leverage while negotiating your offer. 

If you’ve practiced mock interviews with industry professionals, the feedback you received during these sessions will enable you to gauge how well you performed during the actual interview. Being called in for offer discussions is an indication that you performed well at the interview.

5. Experience

Work experience indicates if you have the required skills for the prospective position and is also the main predictor of the value you’ll bring to the recruiting organization. However, having many years of experience will not suffice. A good interview performance demonstrating relevant and provable experience is what will lead to a high compensation offer.

The more relevant your experience for the prospective role, the higher your value to the company and, consequently, the higher your offer. This is especially true for high-paying, senior positions requiring specialized skills and many years of experience.

If you’ve worked on relevant projects, this can add to your competitive advantage and value. At senior levels, diverse experience is valued over the number of years of experience. Leverage these aspects to negotiate a higher salary.

6. Skills

If you possess in-demand or highly specialized skills, companies are likely to compete for your talent. This gives you leverage to land multiple competing offers and negotiate for high compensation. 

For senior roles, showcasing strong behavioral skills in addition to strong technical knowledge is essential. Strong leadership, problem-solving, technical stewardship, and other preferred behavioral skills are advantages when negotiating higher salaries.

7. Competing Offers

This is one of the strongest forms of leverage a candidate can have during salary negotiations, especially for senior positions and especially at FAANG companies.

Good talent is not as easy to come by at senior levels as it is at mid or junior levels. Compensations that run as high as $500k or more are only offered for roles requiring specialized skills and knowledge. The talent pool that makes this cut greatly narrows beyond junior-level positions.

If you can clear an interview at one FAANG company, you’re more than likely to be able to do the same at other FAANG and top tech companies. 

Explore as many opportunities as possible to get as many competing offers as possible from multiple companies. Leverage these offers to increase your bargaining power during salary negotiations at the company of your choice. Companies often compete for senior talent and are likely to negotiate upwards to outbid a competing offer, especially if they don’t want to lose a candidate to a competitor.

8. Company Brand

This is a challenge when negotiating with top tech companies, especially FAANG companies because they enjoy greater leverage in terms of brand value. Candidates will often accept offers from FAANG companies over better competing offers because working at a FAANG company significantly adds to their market value.

FAANG companies bank on this to attract talent, reducing a candidate’s bargaining power.

9. Your Value

The offer you receive is based on the recruiting company’s perception of your value. This may not be in line with your actual value. Consider your market value as well as the value you can add to the prospective company.

Establishing your value is essential to ensure you don’t accept an offer below your true value. Ascertain your market value by considering salaries offered for similar positions and skills at other companies. Base your expectations on your expertise and competitive advantages and hold firm to your worth. 

You can gather information online, from sites like levels.fyi, LinkedIn Salary, Blind, etc. Ensure you obtain information from reliable sources to avoid relying on skewed information. For more accurate data, ask your connections, preferably engineers or recruiters within the prospective company or at competing/similar companies. If you can’t obtain specific salary information for your prospective role, find information on salary ranges and compensation mixes for similar levels.

If possible, try to collect as many as 30 data points. This will provide a fair idea of the range in which you should expect an offer. Excluding the outliers, negotiate for a figure in the upper-end of the salary data range. This will give you a competitive baseline to work from. Even if you don’t reach your target compensation, the resulting offer will be at the higher end of your expectations.

The more in-demand your skills are in the market and to the prospective company, and the smaller the talent pool in the market, the higher your market value. Talent is not as readily available for high-paying, senior-level positions as it is for lower levels. So if you qualify for a senior-level tech job and you enjoy a high market value, you’re better poised to negotiate a lucrative compensation.

Competing offers also signal your market value. Multiple offers from different companies signal high demand for your talent in the market. This will increase your bargaining power during negotiations.

10. Current Salary

You don’t have to share information on your current salary unless you think it’s absolutely necessary or beneficial. In many states, California is one of them; companies are prevented by law from asking candidates for their salary histories.

If your current salary is higher than market standards, it indicates you’re highly valued in the market. In this case, you can disclose your current salary and use it as leverage in negotiations with the recruiting company. However, if your salary is lower than market standards, it signals poor market value. In this case, you may not want to share your current salary to avoid receiving a low-ball offer from the recruiting company.

Current salaries are also not necessarily a reflection of a candidate’s actual value. If you disclose your current earnings, recruiting companies may make you an offer that appears attractive compared to your current earnings. However, this may not be commensurate with your existing skills and value and may also be lower than the standard pay for the prospective role at the recruiting company. 

Negotiating upwards is very challenging when the initial offer extended is low to begin with. If discussions on existing salaries cannot be avoided, you can provide a salary range instead of specific figures to avoid revealing too much information about your salary history.

Read What Not to Do During Salary Negotiation for more tips.

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