What Affects Salary Negotiation When You're Hiring a New Employee?

What Impacts the Salary You Can Negotiate in the Workplace?

Getting down to the nitty gritty in a salary negotiation which is serious business.

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Salary negotiation is the process whereby the employer and the potential employee reach agreement on the terms and conditions of employment. Salary negotiations generally start with an offer from the employer. The potential employee can accept the offer or choose to negotiate details of the offer, usually by a deadline stated by the employer.

The employer states a deadline to ensure that salary negotiation takes place in a short period of time so that the new employee can start work expeditiously. Or, the employer realizes that they will not reach an agreement with the candidate and can contact other qualified potential employees before they are unavailable in the job market.

What Kicks Off a Salary Negotiation?

The salary negotiation often starts with a verbal offer from the employer. Take the time to consider the offer in the context of the employer's benefits package. Unless you are completely satisfied with the offer, it is a smart move to tell the employer that you will let her know within a couple of days. 

This allows you time to think about the offer and determine whether it is acceptable to you or whether you will make a reasonable counteroffer. Once you and the employer have agreed upon the details of your compensation package, you will likely receive a written job offer letter that confirms the details of your salary negotiation.

Salary negotiations are most effectively conducted by one person who responds to the candidate after consulting with other organization key players. Using a point person for salary negotiations eliminates the possibility of mixed messages and misunderstood or poorly communicated offers and responses. Using a point person in salary negotiations is another opportunity for the employer to continue to build the relationship with its selected candidate.

Successful salary negotiations result in an employment contract that is acceptable to both the employer and the new employee.

What Is Negotiable in a Salary Negotiation?

Anything and everything about the job offer is negotiable. The amount of compensation, the benefits package, and the working conditions including days and hours of employment, work flexibility options, title, and severance pay are all negotiable.

Salary negotiations depend on the position. Leeway for salary negotiations generally increases with the level of the position within the organization. Executives and senior managers have the most leeway for a range of executive compensation negotiations around salary, benefits, and perquisites or perks.

Approach salary negotiations from a win-win perspective. You don't want a new employee who joins your organization already disgruntled from the salary negotiations. At the same time, you don't want an overpaid employee who doesn't earn his keep and is ineligible for increases in compensation within a reasonable time frame.

If your new employee joins you feeling disgruntled and devalued because of the salary you offered to pay, they are likely to continue job searching. This distracts the new employee from what you most need them to do—hit the ground running and contribute quickly to your business.

Salary Negotiations Flexibility

The employer's salary negotiations leeway depends on these factors:

  • the level of the job within your organization,
  • how scarce the skills and experience needed for the job are in the employment market,
  • the career advancement or stage and experience of the individual selected,
  • the fair market value for the job you are filling,
  • the salary range for the job within your organization,
  • compensation paid to equivalent positions within your geographic region,
  • the existing economic conditions within your job market,
  • the existing economic conditions within your industry, and
  • company-specific factors that might affect the given salary such as comparative jobs, your culture, your pay philosophy, and promotion practices.

In salary negotiation with a long-term employee who wants a raise in pay, many of these factors play a similar role.

Bottom Line in Salary Negotiations

Fundamentally, after you have considered these factors, the employer must decide how badly you want the candidate and the price you are willing to pay to attract him or her to your organization. Your long-term satisfaction with your employee choice is often a factor of the rationality of your hiring decision and compensation package versus an emotional need to bring the employee on board.

Employees who are hired from an emotional viewpoint rarely succeed when the rose-colored glasses are removed and results and contribution are measured in the stark light of day. Why go there?