Making an offer and negotiating pay with an ideal candidate can be a trying situation. On the one hand, you want to make the best offer possible. On the other hand, however, you do not want to overextend your budget and overpay the candidate.
Negotiating takes practice. However, it is a skill that you can master. Here are steps you can implement in the negotiation process that will enable you to hire the best candidate in a cost efficient manner.
Elements of Compensation
According to the U.S. Small Business Administration (SBA), a good practice would be to pay a salary that is based on location, experience, and the available talent pool. Payscale.com, Salary.com, and the Bureau of Labor Statistics are three sources that can help you analyze these factors with respect to deriving a fair and competitive salary structure. However, how can you combine these factors, stick within a budget, and offer an attractive compensation package to potential candidates?
When starting the negotiating process for a potential candidate's compensation package, there are some reference points you can follow. These include:
- The value of the job to your company.
- The availability and competition for potential candidates.
- The prospective candidate's relative suitability to fulfill the job.
- The track record of integrity and honesty of the candidate.
- The track record of innovativeness and achievements of the candidate.
- Other competitor's' current salary packages in similar job roles.
- Your company's internal pay structure and how much latitude you have for negotiating.
Some other factors to take into consideration before moving forward with the negotiating process include:
- Seeing if the candidate has prior experience in negotiating components of a compensation package.
- Seeing if the candidate shows fear in losing the offer.
- Seeing if they have the fortitude to show assertiveness during the negotiating process.
This latter component is especially important since a potential valuable employee might be lost if they fail to assert themselves during the negotiation process.
Preparing a Budget and Offer
Before extending an offer, it is important to determine exactly what your limits are, especially if you are operating within a tight budget. Consider some “employee perks”' that are less costly that you could throw in. No matter how well-qualified and valuable the candidate might seem, you should never promise the moon if you are not able to deliver.
Some less costly perks you could make to sweeten the deal would be offering the candidate the chance to work remotely as long as the work gets done, adding an additional week off during a major holiday, such as during Christmas or perhaps during a period when work is slow. You can even offer special bonuses such as a signing bonus, shares in the company, or annual performance bonuses. If you decide to provide a company car, you might want to consider the maintenance, insurance, and fuel costs associated with it.
Closing the Deal
When it comes time to close the deal, deliver your offer in writing as well as in person. By putting your offer in writing, you are protecting your company from any misunderstandings that might result from improperly communicated compensation components.
Additionally, presenting your offer in person allows you the opportunity to review it directly with the candidate and answer any questions they might have. You can excuse yourself for a few minutes to grab a coffee, which will give the candidate some time to read through it. Be sure to include all job expectations and responsibilities so they are clear.
Put strong emphasis on company benefits. Even though many candidates will be focusing on the salary component primarily, stressing benefits such as health insurance, bonuses, profit sharing, retirement, tuition reimbursements, vacation allowances, and other amenities are all significant parts of the entire compensation package.
Further, make it clear that they have room for growth in your company (if that is true), which could just be exactly what the candidate is looking for and what might win them.
The bottom line: Salary negotiation has a tremendous psychological impact on a prospective employee. If they come onboard with a sense of enthusiasm and satisfied mood after salary negotiations, they will be more motivated to work hard and put forth the effort to help you make your company a success.