Effective Strategies for Employer Salary Negotiation

You’ve found the right candidate and decided to make a job offer. There is a good chance that you may be facing a salary negotiation. How you handle the negotiation could set the stage for the relationship with your new employee. Here are some strategies to guide you to a mutually beneficial outcome.

Know What the Market Bears and Set a Range

Before you can negotiate compensation with anyone, you first must understand what the market bears now. What are the salary ranges? What benefits are being offered? Are there other unique perks being offered? There are many resources available to gain this information. These include online resources, reputable search firms that fill the types of roles you are trying to fill, and organized data collected from applicants. Once you have the data, set a range with the upper end based on budgets and the unique skills of the potential candidate. Keep in mind that an individual contributor can produce three times their annual salary in operating efficiency or revenue if they meet expectations. Managers and executives could be five to ten times their annual salary.

Expect a Salary Negotiation to Occur and Get Candidate Expectations

Since the COVID pandemic and the “Great Resignation,” candidates have been more apt to negotiate their offers than ever before. A large part of the reason is the fact that there are more job opportunities available to them than ever before. Remote work removed geography and commutability constraints, so candidates can apply to jobs outside of where they live, whereas before, they needed to find a job within a reasonable commute. When faced with a salary negotiation, it’s important to enter the negotiation with a positive attitude and an open mind. Try to find out why changes to the offer are necessary and important to the candidate. This will help you determine if the changes are worth it in the long term for the candidate’s skills, attitude, and experience. Also, if you need authority from a supervisor, understanding these key points will help you justify the change and get buy-in.

Know the Law: Pay Transparency and Overtime Requirements

Over the past few years, there have been regulations surrounding fair pay. In some states, these regulations require salary ranges to be published in online job postings and prohibit asking a candidate about their current salary. If a person is applying as a remote employee and they are in a state that requires salary transparency, then it is advisable to comply even if your company is located in a state that doesn’t require such transparency. Also, the Department of Labor recently outlined new overtime laws, increasing the overtime exemption to $43,888 starting July 1, 2024.

Keep the Focus on the Entire Package Rather Than Just Salary

In negotiation, very often it’s not necessarily the price but the terms that break the deal. Too often, the negotiation is salary-focused, and the negotiation breaks down due to salary restrictions. Focus on all aspects of the compensation plan rather than just the salary. Often, candidates will be more flexible on the salary if there are perks or other benefits that may offset increasing salary. One example could be offering a sign-on bonus or accelerating the salary review date to 90 or 180 days from one year. Maybe a person wants to pursue a degree in the future, so offering a tuition reimbursement plan could be an option.

Timing and Commitment

If a candidate is asking for alterations to the offer, it will be critical to try and get their commitment to accepting the altered offer before formally extending it. Often, employers invest time negotiating with candidates, giving them the changes they ask for, and then the candidate uses that offer as leverage to get a raise at their current employer or to elicit a better offer with another employer. Once you extend a revised offer, it is acceptable to put a deadline of 24 to 48 hours for the candidate to formally accept. This will protect you from candidates drawing out the process and putting you at risk of losing out on other candidates that may have been acceptable runner-ups.