Should You Be Getting Paid More?
As an 18-year-old who is going to be working at a start-up company, I have thought a lot about how valuable I am to the company. I struggle with knowing how much value I can create and converting that into a respectable income. When working for a company, I want to know that I am valued, but the question I have to ask is, "Does my salary reflect my value?"
I mean I don't want to be under-payed, but I also know that I lack experience, so how much money should I rightfully be owed?
I think like me, you too probably struggle with knowing when and how you should negotiate your paycheck. After a lot of thinking I landed on a truth that really helped me keep myself in check.
Truth: You'll never be paid what you're worth, you will only be paid exactly what it cost to replace you.
If a company had to compensate you for every dollar of value that you bring in for the company, they would make no money. Therefore to be hirable, you must get paid less than the value you create. So the bar that is set to measure your pay rate is the bar of opportunity cost. If the company can hire someone who produces the same outputs as you for a lower rate, the company is then incentivized to replace you.
So what does this mean for knowing when you are fairly compensated?
Well, ask yourself, how much value do you create? What forms of value do I create? How many people would be willing to do the same job and get paid less? How much would it cost the company to find those people and actually replace me?
You must know what your outputs are. Can you only do one thing really well or can you also do a lot of other things that the company values? The more skills you have, the more unique you are and harder to replace. Are you passionate and likable? If you have a ton of skills and you are passionate about what you are doing while simultaneously being a great person to be around, you become even more unique, less replaceable. The key here is to evaluate how replaceable you are. If you are replaceable, dial in on how much it would cost to hire your replacement. You might find that the company could only replace you if they paid someone else 20 thousand more dollars. At that point, you could ask for a renegotiation of your pay-rate. On the other hand, you might find that the company could replace you for a profit of 20 thousand dollars. At that point, you must become more irreplaceable.
To sum it up, if your salary is the output, your irreplaceability is the input. It is not how valuable you are as a person. If you want to earn more, you must become more irreplaceable by being more valuable, more friendly, and more diversely skilled than your competition.