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How to maximise your salary as a fresh graduate

Ian Cooper

Career Counsellor
For most fresh graduates looking for their first job out of university, the thought of a higher salary is appealing. If you’re not drawn to pursue a specific role, you may decide to chase a graduate job based on initial compensation and figure the rest out as you go.

That may be a great choice! However, there are a lot of factors to consider (including the value of taking a more holistic, big-picture perspective on your earnings), so buckle up. We’ll guide you through the basics and help you make an educated, informed start to your career.

Head to Prosple YouTube for the full session.

Ask Yourself: What Matters to You?

When you’re beginning to think about your career, a good place to start is with your values. What matters to you?

After all, you’re going to spend thousands of hours every year at your job. That’s a lot of time, effort, and attention — more, perhaps, than you’ll be putting towards any other part of your life. So what’s it all for?

Unless you’re already wealthy, compensation is likely a big part of that answer. But compensation doesn’t have to mean just salary or a financial return. While those may well be your top priority, you should also take time to consider the bigger picture.

Do you want to feel fulfilled by your work or focus on serving your community? What about finding a job that’s an especially good fit for your personality and skill set? Do you value having balance or harmony between your work and the rest of your life? 

Different jobs or career paths will emphasise different combinations of the above. Some may demand all your waking hours in exchange for a higher starting salary, while others may pay less than your ideal number but come with a flexible schedule and a laid-back attitude that blends seamlessly into the life you want to live. 

In other words, maximising your total compensation may mean different things to different people. What does that mean to you?

Compare Initial Salary vs. Long-Term Earning Potential

When thinking about compensation, you’ll want to consider how your starting salary compares to your long-term earning possibility for a given position or career track. Some jobs that offer high initial pay may have limited room for growth, while others that start lower could include the potential of significant returns down the road.

As an example, let’s consider the difference between two software engineers. One starts his first graduate job at Big Corporation X, complete with a comfortable six-figure salary and great benefits. The other chooses to join Small Startup Y as their ninth employee, earning half of what her friend is making — but with a nice chunk of equity in her new firm. 

Today, the first engineer has clearly come out ahead (on paper, at least). Assuming he performs well in his new role, he’s set himself up to eventually make two or three times his starting salary as he earns seniority and climbs the corporate ladder.

However, let’s say that a decade from now, after developing a breakout app, Small Startup Y is bought by Apple or Tencent for a giant pile of money — and the second engineer earns a low eight-figure payout for her equity stake. At 32, she may never have to work again.

Now, your choices probably won’t look this black and white — and besides, you’ll only know if picking Small Startup Y was wise with the benefit of hindsight — but you may face variations on this sort of decision across sectors. 

Do you go into professional services (like law or management consulting) where you’ll have to spend decades working your way up the rungs of a brutal hierarchy for a shot at a partnership slot that could pay over a million dollars a year? Or do you accept a starting position in a field that offers more stability but a lower ceiling on long-term financial growth?

Here, be honest with yourself. If you’re competing with anywhere from a dozen to a hundred other new hires for the possibility of earning a partnership twenty years hence, are you willing to do what it takes to come out on top? Part of your answer will depend on another question: What is your tolerance for risk?

Assess Your Tolerance for Risk

If you’re looking to maximise your earnings over the course of your career, you need to be willing to take risks. As we discussed above, the difference between making a decent or comfortable living and generating a truly significant return generally depends on sacrificing certainty for potential — and then rolling the hard six you need to win your bet.

Now, the clearest example of that kind of risk is striking out on your own to become an entrepreneur. There, you only earn if your business succeeds. However, depending on your vision and drive (plus your sector), founding and owning a company gives you a shot at making an extraordinary amount of money — IF you’re one of the lucky few.

Of course, most of us don’t go on to become founders. A more common situation is following the path of our friend who works for Small Startup Y. By getting in on the ground floor of a new company, you’re in a position to ask for a significant chunk of your compensation in the form of equity — which, while worth little or nothing now, puts you in line to receive a portion of any profits should your firm be sold.

However, there are several risks here. First, many young companies that are offering equity compensation will ask you to accept a below-average starting salary in exchange for your piece of the pie (this is not always the case, though, especially if you’re joining a venture-capital funded start-up). If the company doesn’t succeed, then your equity is worthless, and you will have spent years working for less than market value with no way to recoup your loss. 

Second, your equity stake may be diluted over time. As startups go through additional rounds of funding and bring on new investors, your .5 per cent of the company may go down to .25 per cent, .125 per cent, or even less. While this may not matter if the pie is big enough, you should be aware that equity compensation is not set in stone and is vulnerable to changing business conditions — even when things go right.

Third, you’ll want to consider liquidity. While your equity shares may one day make you a millionaire on paper, your bank will be less than impressed when you ask for a loan to buy a house. Especially if your holdings are in the form of restricted units (which you can’t sell until certain conditions are met), options, or otherwise difficult to quickly convert into cash, then your bank will likely judge your loan application primarily on your below-average salary.

Not all risks are financial, of course. Again, think about your quality of life. You may love the idea of making $100,000 a year as a new air traffic controller — until you start to imagine the stress that comes along with being responsible for the lives of thousands of people during every shift., Working at an investment bank or for an MP sounds like a great way to put your passion for economics and politics to use, but how do you feel about spending 15-hour days on the job?

When you come upon a higher-than-expected starting salary, ask yourself: What’s the catch? Why does this job pay so well? 

The answer usually involves risk.

Consider Sector and Location

Say you’ve earned a degree that’s broadly useful — in business and management, for example. If you don’t feel a passion for any particular career path, then you can often improve your starting salary by choosing which firms you apply to based on sector.

Did you know that the average graduate job at a retail bank pays a little under $60,000 a year, while a new hire working in recruiting or HR can expect to make over $75,000? That’s a 25 per cent jump in salary between two roles that don’t ask for a specialised degree and do require similar skill sets (like attention to detail and a willingness to deal with clients or customers). While not all salary splits will be so dramatic, if you’re willing to be flexible in your field, you can typically improve your prospects.

Here, we can help you assess your options with our annual guide to graduate salaries across Australia. You can compare starting rates between sectors, which can help you decide where to apply and will also come in handy once you’ve got an offer letter in hand and are ready to negotiate. Plus, you’ll see how another factor — location — comes into play. 

Prosple Salary guide 2022

Negotiate a Higher Salary (If You Have Leverage)

After you’ve chosen where to apply, gone through the interview process, and gotten an offer from a firm (or several, if you’re lucky), you’ll be faced with a choice. Do you negotiate for a higher salary?

We’re generally of the opinion that it doesn’t hurt to ask. However, if you choose to push for more money upfront, you’ll have much more success if you can bring some leverage with you to the conversation.

Here are some examples of what we mean

1. Know Your Other Options (BATNA)

When you’re negotiating your salary, you’ll be more likely to hit the number you want if you can look your negotiating partner in the eye and tell them that you’re seriously considering another option. All of a sudden, you’re not just a fresh grad with little room to manoeuvre, but someone who’s in demand — and consequently, may warrant a sweeter offer.

Sometimes called your BATNA (or best alternative to a negotiated agreement), your other option may be as simple as a competing offer letter from another firm. This is ideal, because you can then politely ask your top choice to outbid them. If they want you, they’ll probably do it.

However, you can get creative with your BATNA as well. If you don’t have another job lined up, think about what else you would be willing or able to do with your time if you don’t accept your current offer.

How would you feel about going back to school and earning a master’s degree? What about striking out on your own as an entrepreneur? Heck, if you say it with conviction, you can tell your negotiating partner that you’re considering spending a year tending bar in Phuket and still use that as leverage to get yourself a better deal. But you need to be willing to walk away, or your BATNA will be worthless.

2. Gather Data on the Average Salary for Your Position

Another great form of leverage is knowing what you’re currently worth (remembering, of course, that your value on the hiring market is unrelated to your value as a human being). Say you’re considering a role as an entry-level associate at an accounting firm and your potential employer is offering to start you at $55,000.

With a little research, though, you find that the average salary for a new accountant is actually more like $60,000. Now you’re in a position to push back a little. Ask your potential employer how they’ve come up with $55,000 and if they would be willing to bring you up to market rate instead. If you show them the data, they may decide to accommodate you.

3. Develop Your Relationship With Your Hiring Manager 

Business, like life, is all about relationships. If you like and trust someone, you probably want to help them succeed, right?

Recruiting is no different. If you take the time to build a genuine relationship with whoever is running your hiring process, they’ll be more likely to make an effort to meet your salary requests. 

Now, connecting with your hiring manager is less about laughing at all their jokes (although hey, that probably won’t hurt) and more about being direct and honest. Your goal here is to develop trust. By being open and authentic during your interviews, you’re giving them permission to do the same thing and establishing the basis for a real, human connection. That’s something you can’t fake, but you can achieve if you’re willing to put yourself out there a little.

Of course, you may be dealing with someone you just don’t click with. That’s okay — this happens! However, even then, you should always make the effort to be honest, kind, and respectful. Not only is that the right thing to do, but there is no quicker way to torpedo a relationship than by doing the opposite. Give your negotiating partner the same respect you want in return and even an awkward dynamic may blossom into mutual appreciation.

4. Be Honest About Your Needs

If there is a specific reason why you need a higher salary, you can be honest about that. This should probably be something more substantial than wanting a new car (unless you happen to be negotiating with someone who genuinely appreciates that kind of bold request). But if you are caring for a sick family member or are struggling to make rent payments, you don’t have much to lose by saying so.

While there is no guarantee that your potential employer will be willing or able to give you more money, most people will understand why you’re asking. If they do have some room to work with you, this may be enough to nudge them in that direction. Again, think relationships here. If your friend is in need and you can help, you probably will.

Figure Out Your Hourly Rate

We touched on this during our discussion of risk but it bears fleshing out further: How do the demands of your job relate to your salary?

Let’s say, for example, that you’re deciding between two positions. Company A pays $75,000 while Company B is offering $100,000. Seems like a no-brainer, right?

But here’s the catch (remember, we suggest you always look for the catch): Company B expects you to work almost twice as many hours as Company A. While you’ll be putting in about 40 hours a week at Company A, first-year employees at Company B routinely work 70+ hours.

This means that assuming you work 48 weeks per year, you’re making $40 an hour at Company A and under $30 an hour at Company B. Now, if your main goal is reaching $100,000 a year and you don’t mind working the extra hours, that may be an acceptable tradeoff. Company B could also offer other benefits like improved long-term salary prospects or stronger networking opportunities.

On the other hand, you may place more value on your free time. What else could you do with that extra 30 hours a week if you chose Company A? Catch up on sleep, spend time with friends and loved ones, or even start a side business that could one day earn you more than either of your current offers.

Remember Optionality

When it comes to maximising your earnings, options are your friend. Most people change not just jobs, but careers several times over the course of their working life. This means that you’ll want to consider whether a given path will open doors down the road, or close them.

For example, let’s say you choose to become an IP lawyer. That’s a lucrative career where you’ll probably make great money. But it’s also highly specialised — to the point that if and when you want to move on and do something new, you’ll likely have to accept a lower salary because the most valuable parts of your experience may not transfer elsewhere.

Other roles, though, can help expand your options, not constrict them. Say you spend your first five years out of university working as a management consultant. Your salary will likely be on the lower end of your peer group and your stress levels may be higher. But when you’re ready to move on to another position, you’ll find yourself in demand because you’ll have a skill set that can add value to almost any organisation. 

Now, if you’re deeply passionate about a certain career trajectory, then optionality may not be a big deal. What do you care that a baker probably can’t move on to a high paying position in the tech industry if your life’s ambition is to become a baker? However, most fresh grads don’t have that sort of single-minded clarity of purpose (and even those that do may soon discover that ambitions tend to change over time). If you’re ambivalent about the sort of graduate job you take, we suggest erring in the direction of preserving your future flexibility.

Final Thoughts

As you begin your graduate job search, we suggest that you take the time to think through what matters to you and how you want to approach maximising your compensation from a wide-angle, holistic perspective. Then you can relax and see where the road takes you. You’re in for a heck of a journey