In this post, I’m seizing the bull by the horns and taking on the emotionally-charged topic of compensation. I’ll cover both employer and candidate perspectives, plus my role of reconciling the two. We’ll also explore myths and rookie mistakes in salary negotiations, and conclude next week with how to avoid “compensation frustration” and achieve a desirable outcome.
Stakeholder Perspectives
Employer
The considerations that define salary aren’t as arbitrary as job seekers might think. For example, in addition to what current employees in the same role are making, employers rely on staffing plans and work scopes to determine what they can pay to maintain profitability margins. There are also external factors like supply and demand for talent. All these things roll up to inform a sense of the candidate’s worth: How does s/he compare to others with similar backgrounds and years of experience, both inside and outside the company, PLUS what they can afford to pay. While not resolutely bottom-line driven, the focus is on what’s most practical for the business.
Candidate
When I ask job seekers if they think they’re being fairly compensated, 100% of them say no. It’s awful to work so hard and feel undervalued, and many candidates come to the table with the goal of correcting current injustices. Key factors that influence their salary requirements are: 1) what their peers are making, 2) current salary and time/size of last increase, 3) the worth or market value of their contributions, 4) their expenses and quality of life ideals. Compared to employers, their thought process is personal and emotional.
Recruiter
Are you beginning to see where the fit hits the shan? As the recruiter, it’s my job to reconcile practical and emotional salary considerations. And here’s where the rules that govern recruiting get funny. As agents for the employers that pay our bills, our goal is to hire as cost-efficiently as possible. However, since our fee is a percentage of first-year salary, the more we get for our candidates, the more we take home for ourselves. So where does our loyalty lie?
It’s a trick question. We want to close the deal. The other stuff is nominal, trust me. We are the arbitrators that listen to the rationales of both sides and drive to an agreement.
Salary Negotiation & Others Myths
Myth #1: Good recruiters negotiate salary.
This may shock and dismay you, but I try to avoid salary negotiations. There’s nothing exciting about squabbling over a few thousand dollars on Offer Day. It just makes everyone cranky.
Instead, I’d rather define an attractive and realistic salary target during our first conversation and navigate toward it, so there are no surprises later on. This takes salary out of the equation, so we can all focus on more important things.
Of course, this is the ideal scenario. From time to time, a candidate’s salary requirements will shift, due to multiple job offers, a well-timed promotion or counter-offer.
Note to employers: The chances of these things happening increase as more time transpires between the last interview and the offer stage. Move quickly and decisively.
Myth #2: Cost of living and/or personal expenses are legitimate reasons to ask for more money.
There’s a joke that goes:
“I must have a raise,” the man said to his boss. “There are three other companies after me.”
“Really?” the boss asked. “What other companies are after you?”
“The gas company, the telephone company, and the electricity company,” the man replied.
True, higher gas prices make commuting more expensive but think of it this way: Should people that need to commute further earn more than those that live close to the company? Should parents (with additional child care and schooling expenses) be paid more than employees without children? Of course you can think “I lost my shirt when the housing market collapsed. It’d be nice to recoup some of those costs.” But ask yourself: Is it reasonable to ask your future employer to cover these expenses?
Salary ranges do follow cost of living expenses, as reflected by compensation differentials across the country. However, it’s important to remember tandem variables like talent supply and competitive market rates. For example: According to salary.com, the cost of living in NYC is 43% higher than Philadelphia but the salary difference is only 12%. Meaning: To maintain the same quality of life moving from $100K salary in Philly, you’d need to make $143K in NYC but employers are only paying around $112K for the same job. BTW, this site has great tools. Check it out.
Myth #3: Future employers should make up for the injustices of former employers.
What if you’ve been toiling away for 2 years without a pay increase, or you’ve been promised a bonus in April but need to start a new job in March? Is it reasonable to expect your future employer to offset the bloodletting?
It depends. Employers typically take current salary or salary history into consideration when drafting offer letters. I also encourage them to use a second proxy: Current market rates for the similar roles and experience. Sometimes there is a huge disparity and if I have all the data points, I can make a compelling case to employers.
Assumptions like “I’m making $110K, but I really should be making $135K so $150K is my absolute minimum,” (36% increase) earns you an A in creative math but is most likely going be read as greedy and unwarranted.
Myth #4: The recruiter’s fee comes out of your salary.
Most of the companies I work with have a separate budget for recruiting expenses. They don’t subtract my fee from the salary assigned to the role. Those that do are causing themselves a disservice by not offering a competitive range to attract top talent.
Companies make advance decisions about when to engage external recruiters. Once the decision is made, they don’t penalize candidates that come from recruiters. The smart ones recognize that the cost of talent acquisition is offset by the success that comes from being properly staffed. Nobody wants to forfeit a $2 million project because a key position sits open for 4 months. That’s silly.
TO BE CONTINUED… Tune in next week for the thrilling conclusion of salary negotiations!
