Developing your salary negotiation skills is useful for both employees and HRs.
Having the experience of sitting on both sides of the negotiation table, I can relate to the candidates I’m negotiating with as an HR manager. After all, I and other HRs have all gone through the same negotiation process as candidates before getting our positions. Many people feel uncomfortable negotiating their salaries. It makes us feel like there is a conflict and most of us don’t want to come off as pushy.
Don’t get me wrong, there are also those people who have no trouble at all to describe their excellence and why they deserve more than what you offered. In my experience, these are usually men who score rather low on the agreeableness scale. A recent research has shown that agreeable employees tend to earn less over the course of their careers. Being polite and compassionate can come at a cost in that sense.
Agreeable employees can earn less and work harder, but there’s an upside
It all comes down to human relationships. The anxiety that comes from asking for more money is enough to hold some people back from even trying. While women are less likely to negotiate their salaries than men, it’s an issue that concerns both genders. As much as 68 percent of women and 52 percent of men accepted the salary offered to them and didn’t negotiate.
Candidates who choose not to negotiate their salaries are damaging their earning potential over the long term. This is because bonuses and raises are often calculated as a percentage of the base salary. Evaluating your own market value isn’t an easy task, and more often than not people just want to save themselves from the trouble.
Women may not realize that many companies set aside money with the expectation that employees will ask for better compensation packages… Yet only 30% of women bother to negotiate at all, while 46% of men negotiate
As an HR, you’re used to frequent salary negotiations with potential new employees. Salary negotiations can be stressful for both parties. For the employees, it’s about getting a fair compensation for their input and proving that they’re worth the money. It’s basically an exchange of the employee’s time and effort for money. For HR managers, it’s about keeping the company’s expenses within budget and gaining the approval of their supervisors.
There is a window for the salary negotiation that exists between the time you make an offer and the time your applicant accepts that offer. After a successful salary negotiation, the satisfied candidate feels wanted by your company and you’re excited to welcome the candidate to your company. It’s a delicate process, and to prevent either party from feeling devalued or confused, certain ground rules have to be established.
Here are 5 ways how HR managers can be successful in salary negotiations
#1 Collect data about the market
The first thing to do is to research your market and the general economic climate. You can take a look at other companies in the same field that have a similar size and the same location. What kind of salaries are they offering to their employees? And what is their typical raise for employees with a certain number of years of experience?
You should collect reliable data for each position on your team. The best way to access this data is usually through other HR professionals and salary surveys. This is also where good networking skills come in handy. Try to maintain close relationships with other HRs to exchange valuable information.
#2 Collect data about your company
You also need to do research about your company. How is your company doing as a whole? What decisions has your company made concerning salaries and raises? What are the budgets for new employees? You need this data to understand the limitations of what you can offer. In case of a hiring, it’s useful to know how much current employees in similar positions are earning.
You should also understand the business priorities of your company and which parameters to use when deciding salaries. For example, are salaries and raises based more on the employees’ performance and skills, or years of experience?
#3 Collect data about your team
Since the salaries that you can offer are limited by a finite budget, offering a higher salary than what was planned always has consequences. You have to gather as much data as possible to make an optimal decision.
This involves collecting data about your team, too. You need to develop a concrete rationale for your decisions. Be articulate when you explain the offer to your candidate. You have to be prepared to answer questions and justify your position. In case of a pay raise, keep in mind that offering a higher raise to one employee means that another employee will get less. Develop some criteria to decide which amount of raise each employee deserves. What is each employee’s value to the company and does s/he exceed or fall behind the expectations?
#4 Listen to your candidate
After you have done your research and arrived at a figure that you can offer, it’s time to turn your attention to the person sitting in front of you. Try to find out what was the level of your candidate’s most recent salary and benefits. It’s a good practice to ask for a salary expectation already in the application process. You can also ask from former employers during your reference checking. This way you will have a good idea of what your candidate might be looking for.
Once you’re actually negotiating with your candidate, you should ask relevant questions and listen carefully. Determine why your candidate has come to that specific figure. And find out if there is any room for negotiation. The goal of the negotiation is that both parties are satisfied. It’s not about winning or losing.
#5 Communicate effectively
When it’s your turn to talk, make sure that you’re clear about what you can offer. Before this, you have to know the limits of your offer, i.e. the budget that has been assigned to that specific position. Even if you have decided that the salary you’re offering isn’t negotiable, there other benefits that you also need to consider before making an offer. These benefits can include sick leave, signing bonus, paid vacation, tuition assistance, and severance package, for example.
Benefits can have a strong impact on the candidate’s decision to accept or decline your offer. For SMBs, there are usually more restrictions for benefits. For example, a small business isn’t able to afford a hefty severance package in case of a dismissal. Be upfront about the reasons why you cannot offer certain benefits. Most companies have limits, and better to communicate these limits to your candidate. The recruiting process is time-consuming and expensive. It’s also a long way to get to the stage where you’re making an actual offer. Given that, it’s in everyone’s favor that you reach an agreement with the candidate.
If you’re having difficulties attracting qualified candidates, this could be due to ineffective communication. Effective communication is required already when drafting the description of the vacancy. You need to make sure that your content is always polished and free of any mistakes. Polished content creates a better first impression and attracts the best talent. If your content, could use some editing, there are many tools and services that can help. For example, you can check Grammarly, Handmade Writing, or Slick Write.
How to negotiate the price?
When it comes to the actual price negotiation, there are certain rules that you can follow to achieve an optimal result. The negotiation itself is rather simple. You just have to decide what is your price ceiling, the maximum salary, and benefits that you can offer. After reaching this limit, you should be willing to risk losing a qualified candidate.
First of all, do not start the negotiation from too low. Make a competitive offer. Otherwise, your candidate will feel uncomfortable asking for a much higher salary and will simply move on to the next position. If you want to leave some room for negotiation, you can make an offer that is slightly below your maximum offer. Many people are satisfied if they feel like they have negotiated their salary. Their counteroffer is also likely to be reasonable and within your budget.
Keep in mind that if you decide to accept your candidate’s counteroffer, it means that your negotiation is over. You have just hired a qualified new employee to your team. It’s better to avoid over-negotiating, especially if the requested increase is small. Your primary goal should be to get a signed offer from a highly qualified candidate as quickly and efficiently as possible.
People tend to look at salaries in tiers, and we have a preference for even numbers. Keep this in mind when making an offer. It’s the responsibility of you and your candidate to know the range of competitive salaries. If your candidate’s counteroffer is outside the market range, you should proceed with caution. This could happen if your candidate is inexperienced. You can then use this opportunity to explain your side of the offer.
Take advantage of HR software
Human resources software can help in the management of employee information and other related tasks such as managing people and automating manual tasks. This saves labor time and assists your HR processes, allowing for better planning, decision making, and budgeting. When you have all the necessary data in your HR software, it’s easier to prepare for the salary negotiations with candidates. You have something accurate to fall back on when you need confirmation that you’re making the right decision.
With HR software, you can, for example, use historical data to see how many employees are needed at a specific time of the year. This helps you allocate resources correctly. When all HR and employee management systems are in one place you can improve your business operations and make them more accurate and efficient.
Additional benefits of using HR software include the use of analytics tools to collect and analyze data accurately and efficiently. Despite the initial costs of acquiring the software, installing it, and training employees to use it, HR software leads to improved overall ROI due to saved time, reduced amount of errors, and acquired new personnel. Most of the software is also customizable and scalable which means that it can be easily adapted to change and the demands of a growing business. In addition, your data remains more secure since it’s encrypted and has customized permission levels.
If you’re interested in using HR software, you can take a look at CakeHR. It’s easy to get started with this online software that is suitable for companies of any size. It helps you solve all of your HR challenges and includes modules such as timesheets, shift scheduling, and expenses & performance. First, you just have to upload your employee database to your online staff directory. Next, you will automate your HR processes and let yourself focus on building your business. Finally, you can create customized reports and get meaningful insights from the data.
A lot is at stake when you negotiate a salary with a potential new employee. Hopefully, you will find these guidelines useful for your career as an HR professional. Being able to negotiate salaries effectively and professionally is one of the key skills of an HR manager. It can be the determining factor for a candidate whether to accept an offer or not and whether you as an HR can keep the salary within budget.