Bessie is a freelance writer and has 10 years of HR experiences. She is currently a Regional HR Business Partner with a US MNC.
Here’s a common scenario many of us face: After that successful interview session, you are bright-eyed and eager to receive the salary offer from the organization. To your disappointment, the salary offer is below your expectation.
While most candidates expect a 10% to 20% increase during a job-switch, not every organization is able to meet that expectation. Besides considering the candidate’s qualification; work experiences; current and expected salary, an organization has to review their salary structure and internal equity to determine a salary offer. These are usually not openly discussed; hence most candidates are not aware of such considerations at the back-end.
Every established organization has its own internal salary structure. Salary structure is created based on market data to ensure salary competitiveness within the same industry. This is also known as analyzing external equity.
Some companies may be more transparent than others on sharing their structures to candidates. Basically, each position in an organization has its own grade or level and a salary range. The salary range will consist of a minimum pay rate and maximum pay rate. For a fully competent candidate, the most ideal and competitive rate will be at the median of the range.
A candidate who is new to a role usually receives a salary which is lower in the range while a very experienced candidate may receive an offer which is above the median.
Companies avoid offering salaries near the maximum pay rate since that would limit the salary growth of a candidate in subsequent years. Once an employee reaches the maximum within the salary range, they will enter the red circle and are no longer eligible for pay increase.
An organization also has to consider internal equity when determining the salary for a candidate. Internal equity refers to reviewing the current salaries of existing employees holding the same position and job responsibilities within the organization. It ensures that employees are rewarded fairly across the organization.
To illustrate the point of internal equity: there are two accountants –Tan and Lim working in the organization. Tan earns $3000 and has a bachelor degree with 3 year of relevant experience; Lim earns $5000 has a bachelor degree with 5 years of relevant experience. The hiring manager selected a candidate who has a Bachelor degree and 4 years of relevant experience in her previous organization. Based on internal equity, it is most likely that the salary offer will be around $4000.
If you receive an offer whereby the salary is lower than your expectation, you should try to understand their pay philosophy. Companies may not be able to share all the information with you but you will be able to obtain a better understanding of their pay structure.
You should also consider the entire compensation package. Base salary is only one component so it is important to understand the benefits offered; additional allowances and bonus payout.
Most importantly, you should understand the growth opportunity within the organization. If an organization strongly believes in developing their employees, it will still be a worthy consideration over others that only offer a marginally higher salary.
Learn more about how industry specific salary range here.