Tips for a Successful Salary Negotiation

Follow These Tips to Negotiate a Win-Win Compensation Agreement

Person shaking hands after a successful salary negotiation.

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A salary negotiation window exists from the time you offer a job to a candidate until the acceptance of the job by your selected candidate. The results of this salary negotiation can leave a candidate feeling wanted by your organization or devalued. The results of this salary negotiation can leave the employer excited to welcome the candidate or feeling as if he lost.

A positive employer and a positive employee are the results of a successful salary negotiation. Here are tips for conducting a successful salary negotiation.

Employer Salary Negotiation Tips

How much leeway do you have for salary negotiation and other conditions of employment with your candidates? The answer ranges from not much to a lot. One key factor is the discussion of salary, benefits, and working conditions that occurred with your prospective employees during the interview process.

Your candidates have likely shared their current or most recent salary with you (although it is becoming increasingly illegal for employers in many jurisdictions to ask for this information from their job candidates.). You may have shared the salary range for the position with your prospective employees. The posted job listings may also have given prospects an idea about the salary range. 

In fact, employers are advised to provide this salary information in their job listings whenever possible so that you are not inundated with under or over-qualified candidates who are willing to settle for any job. You will attract the candidates who might work out for you.

Another key factor in salary negotiations is the level of the position; you likely have more bargaining room with higher-level employees and with employees who are the sole employee performing a particular job in your company. They are also prone to asking for additional perks and benefits if they can't get you to offer more money.

The third factor in salary negotiation is how badly your organization needs this employee and how much difficulty you have in finding his or her skill set. Market pay ranges also play a factor in your salary negotiation decisions.

Employee Salary Negotiation Considerations

Consequently, the employer's salary negotiation leeway depends on market factors. These factors include the:

  • Level of the job within your organization
  • Scarcity of the skills and experience needed for the job in the job market
  • Career progress and experience of the individual selected
  • Fair market value for the job you are filling
  • The salary range for the job within your organization
  • The salary range for the job within your geographic area
  • Existing economic conditions within your job market
  • Existing economic conditions within your industry

You may also have company-specific factors that might affect the given salary such as comparative jobs, your culture, your pay philosophy, and your promotion practices.

Bottom line? How badly do you want and need this candidate? If you are too needy, your salary negotiation strategy will quickly turn into a capitulation. And, capitulation, paying more than you can afford, paying disproportionately to the pay ranges of your current employees, and paying a new employee salary and benefits outside of your comfort zone, is bad for the employer and bad for the candidate.

The new employee’s work is scrutinized under a microscope; employer expectations may be way too high. Fellow employees may resent the negotiated salary and think of the new employee as a prima donna.

In a win-win salary negotiation, both employer and employee leave the salary negotiation feeling ready to get started on a long-term, successful relationship.

If you’ve ever been involved in an intense salary negotiation, you know that it can consume your mental and physical energy way beyond its importance. This is because, by the time you reach the stage of making an offer, you have spent the time to develop a pool of candidates. You have interviewed various candidates for weeks.

Intense Salary Negotiation

Your organization has invested significant time and energy in wooing and getting to know your final choice candidate. More sophisticated candidates, higher level candidates, and candidates with significant career progress will counter your initial offer letter, so expect it. Even your lower level, newest candidates will ask for $1,000-5,000 more than you offered as a normal occurrence.

Additionally, the expectations and needs of candidates can sometimes blind-side the employer. If multiple people have conducted interviews—which is recommended—you have little control over the expectations expressed and what the candidate comes to believe about the position as a result of the interviews. You also have no control over the content of offers from other firms that can occur simultaneously.

Salary Negotiation Tips

While they are not meant to comprehensively detail how to conduct a salary negotiation, these hints and tips are offered to ensure that you conduct successful salary negotiations.

  • Salary negotiation is not about winning—unless both parties win. If either party feels they have capitulated, not negotiated, both parties lose.
  • Make every effort to identify the most recent salary and benefits your candidate received. Most organizations ask for salary on their job applications and in their job postings and ads. Some candidates offer W-2 forms and other proof of salary when employers request proof of compensation. (This is not recommended, by the way. It's more intrusive than employers should be about their candidates' backgrounds.)
    You can also ask former employers during reference checking. You may not be able to match the salary but you will have a good idea of what the candidate will seek during salary negotiations.
    While these tips are not meant to comprehensively detail how to conduct a salary negotiation, these hints and tips will ensure that you conduct successful salary negotiations.
  • Know what your salary negotiation limits are. Base your limits on your internal salary ranges, the salary paid employees in similar positions, the economic climate and job searching market, and the profitability of your company.
  • Recognize that, if your salary is not negotiable, and even if it is, superior candidates will negotiate with you in other areas that may be negotiable.
    These include benefits, eligibility for benefits or paid COBRA, tuition assistance, paid time off, a signing bonus, stock options, variable bonus pay, sales commissions, car allowance, flexible schedules, teleworking, paid smartphone, severance packages, and relocation expenses. In fact, sophisticated candidates will negotiate in all of these areas and more.
  • Even if you are convinced of the candidate’s potential positive impact within your organization, and a negotiating candidate is likely to keep reminding you, most organizations have limits. You will regret violating your limits; even if you have to start your recruitment over, you will save yourself years of headaches and prohibitive costs.
  • In one company, a candidate tried to negotiate a severance package that provided six months of his base salary plus an additional one month for each year he worked for the company. Plus, he wanted all of this money in a lump sum upon dismissal.
    At $5769.00 per pay, the organization would have had to come up with approximately $116,000.00 upon his dismissal after only three years of employment. Not too many small and medium-sized companies can afford a compensation package in this price range or come up with a lump sum such as this. The candidate backed down his demand.
  • If your initial offer is not negotiable, or barely negotiable, try to indicate that to the candidate when you make the job offer. One organization made an acceptable offer to a special candidate whom the organization had been trying to hire for several years into an appropriate role. (They waited to make an offer until the right position opened up as the candidate had turned down the salary offered for a lesser role in an earlier job search.)
    They said, "We are offering you $60,000 in base salary plus the potential to earn up to $20,000 in bonuses during your first year. Others who have been with this organization for up to nine years are within a couple thousand dollars of that base. So, you can see how much we value you with this offer.
    "Additionally, as you build your accounts, some of our business developers are making well over $100,000.00." The organization was trying to tell her that the base was firm and that the upside potential in bonus was high. She accepted.

There is a lot at stake when you negotiate salary with your chosen potential employee. Use all of these salary negotiation tips to ensure that you don’t blow the opportunity to hire an excellent, qualified, superior employee.