How to Negotiate Salary with Your Chosen Candidate
Finding the right job candidates is a challenge in itself. Once you have identified a good candidate for your position, you’ll still need to offer a salary that’s fair for both sides. This is a lot easier said than done. Offer too much, and you could overpay the candidate and hurt your company's budget. Offer too little and you risk offending the candidate to the point where they won't be willing to negotiate further. Keeping that in mind, let us show you how to prepare and execute successful salary negotiations.
Know your Candidate and the Position
Before you even begin the job search, research what salary the candidates you'll be looking at are expecting. It's not a one-size-fits-all kind of situation. Besides knowing how much the position should pay in general, there are other things to take into consideration, such as where you are located (if you live in an area where the cost of living is high, salaries should reflect that) as well as how much experience and what kind of experience the candidate has.
Do plenty of research into the position you're offering to get a good idea of how much you should expect to pay. This is not as difficult as it might appear. You can look up the position on websites such as Glassdoor or Payscale to get some ballpark figures. You can also reach out to connections within your field who have hired for that position before to ask what kind of salaries they pay. If you receive any calls from recruiters, talk to them about the responsibilities and pay of the positions you're looking to fill. You don't necessarily have to go through them when you do this -- many recruiters will be happy just to engage even if you don’t use their services, hoping to start a potential future relationship.
Find Out their Expected Salary (it is illegal in CA to ask for wage history or current wages)
It's extremely important to know that it's illegal in California to ask a job candidate what they are currently making or what they were making in the past. While this could be helpful information in determining what to offer them, it puts job candidates at a disadvantage since you could use this information to lowball them. Instead, use the information that they have provided on their resume to compare to the research you find on the Internet and in speaking with industry professionals to get an idea of what they are likely looking for.
Find Out your Company’s Range
You won't want to go over budget when offering a job candidate a salary or when negotiating their salary, so find out exactly what your company can offer. You'll want to work within a range, which means you won't want to offer the maximum amount you can afford--you'll only want to work up to that number if you absolutely have to.
Although you can't ask a job candidate about their past or current wages, you can certainly ask them open-ended questions that will give you a better idea of what you should offer and how flexible they will be. For example, if they are looking to advance their careers, then they might be more willing to negotiate their salary if you can offer them potential promotions within a certain period of time. Be cautious not to promise future salary increases as any increases should be merit based in most cases. However, depending on their personal circumstances, they may be less flexible about their financial needs, in which case their salary may be the most important aspect of the job to them.
Ask Them Outright
While open-ended questions about their personal goals and life situation will give you an idea how open they are to negotiating, this won't necessarily tell you how much you should offer. Simply asking them what they are looking for in terms of compensation is appropriate. It does put them on the spot a bit, so lead up to such a question by going over their qualifications and accomplishments in a positive manner before asking. Do not overreact to their answer. You don't want to come off as if that number was absurdly high or surprisingly low. Keep in mind that they may pad the number that they are actually looking for because they know you're likely going to come back with a lower offer.
Lead with a Good Number
From the information you've gathered over the course of your research as well as the budget that you have to work with, make your first offer. The offer should be somewhat in line with what you think that they're looking for. It should reflect not just the position you're hiring for but also the unique skills, knowledge, education, and experience that they are bringing to the table. Make sure that the offer is fair when compared to the rest of your team as well. Making an offer that's significantly more than what you're paying your current team could hurt the morale of your current employees.
Be confident about your offer. The more confidence you have when you make the offer, the more the candidate will assume that you've done your research and that you believe that the offer you've made is fair. If they can tell you're not confident in your offer, they will be more inclined to negotiate and they will think that they can obtain a much larger number.
Get Right to It
When you call a job candidate to make an offer, don't hesitate. Hesitation shows a lack of confidence. It will seem like you know you're not offering them fair compensation and that you're trying to stall. Get to the point right away. Once you've made the offer, give them a little bit of time to let it sink in. Then ask if they have any questions in regards to your offer. For example, they might want to know about your benefits package. In some cases, a candidate might be willing to take a slightly lower than expected offer if you're providing an impressive benefits package.
Let them ask any questions that they might have. If you can tell that they are disappointed, ask them what they were expecting. Be sure to inform them about any additional compensation that they can earn (such as bonuses or commissions) or if any room for growth is present with their position (the ability to improve their salary with promotions in the future). Whatever you do offer, make sure it's below the max limit allowed for in your budget so that you do have some room to negotiate with the candidate.
Don’t Over Explain the Number
Don't break down your salary offer to try and justify it. Trying to justify it will come off like you know you're offering less than what they're worth. For example, saying something along the lines of "we would offer more but you don't have as much experience as we were looking for." This kind of explanation usually doesn’t go over well. They will be less likely to accept and more difficult to deal with if you attempt to negotiate.
Allowing Negotiations is Critical
When you make an offer, make sure it's not a "take it or leave it" offer. Don't be mistaken into thinking this is a show of power. That's not what your goal should be when hiring new employees. By refusing to negotiate your terms, you're essentially telling job candidates that your company has an "our way or the highway" mentality. Few job candidates are going to work at a place where their thoughts and ideas won't be taken seriously. They want to be able to contribute in a meaningful way. By allowing them to negotiate, you show them that you do care about what their needs are and that you value what they can bring to the table. This won’t apply to all positions as there will be some that you are hiring for that have a concrete starting pay. In this case, let the candidate know what the pay rate for the position is up front.
Include One Round of Negotiation
Because you want to show the candidate that they are wanted, make sure that your offer has room for negotiation. They may not even decide to negotiate, but if they do, you'll have room in your budget to do so. You may want to limit negotiations to one round. Allow them to provide you with a number that they are more comfortable with and then return to them with an improved offer. If it's still not satisfactory, then you may not be a good fit for each other.
The Usual Mistakes
Do your best not to make any mistakes when making your offer or negotiating your offer. Certain mistakes can offend a candidate or could empower them to continue negotiating past the point of productivity. Here are a few common salary negotiation mistakes that employers make that you should avoid:
While you’ll want to leave room for negotiation, try to make an offer that you view as fair. If your offer is too low, you risk offending the candidate. Either they will know that you're low balling them and trying to take advantage of them, or they will think that you don't value what they have to offer. Even if you were just attempting to start low to give yourself room to negotiate, you risk the candidate simply declining the offer and walking away before you have a chance to.
Accepting Ridiculous Counter Offers
If they make a counteroffer that's well above your initial offer, don't just take it assuming that this is the number that they're worth. Don't go into negotiations with the thought that you would like to get their price down if possible, but if not, oh well -- at least you tried. Accepting a ridiculous counter offer will put you in a bad position in terms of the employee and employer relationship that will follow. They will not take you seriously and will assume that they can get away with anything.
Allowing Endless Haggling
The reason you should try to limit negotiations to one round is that more than that risks endless haggling. If you offer $45,000 and they counter offer $46,000, then at that point the candidate is trying to milk as much out of you as possible. At some point, you have to make a "take it or leave it" offer. This goes both ways -- if they want $50,000 and you're offering $40,000, don't come back to them with an offer of $41,000. It's just going to lead to endless haggling. Respect each other's time.
Last of all, if you accept a counteroffer or they accept a counteroffer, that should be final. The other party cannot try to negotiate more once a counteroffer has been accepted in the hopes of lowering or raising the number a little more. Once a counter offer is made by either party, all previous offers are considered void. A candidate cannot counter offer then try to accept the initial offer unless you offer it again.
Focus on the Win-Win Whilst Negotiating
When you find a job candidate that you want to hire, determining what to offer them shouldn't be a contest. You're not trying to "win" a negotiation. It's why low balling is such a bad idea. You want to offer them a fair salary that your company can afford to pay and that the candidate will be happy with. The last thing you want is to get the candidate to accept a salary that they are unhappy with. This is not a win for you even if you're paying less. The only thing it accomplishes is hiring a employee who isn't motivated to work hard because they feel underpaid from the start or that will continue looking for other opportunities
Focus on settling on a number that both sides will be happy with. This will help to establish a good relationship between you and your new employee. You want them to trust you and to feel like they should work hard for the compensation that you've offered them.
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