Tips for a Successful Salary Negotiation

You Can Negotiate a Win-Win Compensation Agreement

A successful salary negotiation results in a happy employer and a happy new employee.
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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 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 result of a successful salary negotiation.

Here are tips for conducting a successful salary negotiation.

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. 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.

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.

A 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.

Salary Negotiation From the Employer's Point of View

Consequently, the employer's salary negotiation leeway depends on these factors:

  • the level of the job within your organization,
  • the scarcity of the skills and experience needed for the job in the job market,
  • the career progress 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
  • the salary range for the job within your geographic area,
  • 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 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.

Additionally, expectations and needs of candidates can sometimes blind-side the employer. If multiple people have conducted interviews – which I recommend – 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, I offer you these hints and tips to ensure 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. (I don't recommend this, by the way. It's more intrusive than employers should be.)

    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, I offer you these hints and tips to ensure 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, paid cell phone, 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. I don't know too many small and medium-sized companies that can afford a compensation package in this price range or come up with a lump sum such as this.
  • If your initial offer is not negotiable, or barely negotiable, try to indicate that to the candidate when you make the offer. I once made an offer to a special candidate whom an organization had been trying to hire. (They waited to make an offer until the right position opened up.)

    I 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 us for up to nine years are within a couple thousand dollars of that base. So, you can see how much we value you.

    "Additionally, as you build your accounts, some of our business developers are making well over $100,000.00." I was trying to tell her that the base was firm and that the upside potential in bonus was high.

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