Did you just pass your first interview and now you are wondering what you should say on your salary negotiation?
First, congratulations on your smooth interview. Second, you’ve come to the right place. In this article, you’ll learn how employers offer salary to candidates they’d like to hire.
While most candidates expect a 10 percent to 20 percent salary increase during a job-switch, not every organisation is able to meet that expectation. Besides considering the candidate’s qualification; work experiences, current and expected salary, an organisation 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.
See also: Negotiating Your Salary The Wrong Ways
Every established organisation 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 might be more transparent than others on sharing their structures to candidates. Basically, each position in an organisation 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 typically receives a salary which is lower in the range while a very experienced candidate might 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 organisation also has to consider internal equity when determining the salary for a candidate. Internal equity refers to reviewing current salaries of existing employees holding the same position and job responsibilities within an organisation. It ensures that employees are rewarded fairly across the organisation.
To illustrate the point of internal equity: there are two accountants – Sarah and Adam working in the organisation. Sarah earns $3000 a month and has a bachelor degree with 3 years of relevant experience; while Adam earns $5000 a month, has a bachelor degree with 5 years of relevant experience. After learning the gap of experience and pay, the hiring manager will likely offer $4000 per month salary for a candidate who has a Bachelor degree and 4 years of relevant experience in her/his previous organisation. This can be predicted based on internal equity where salary is calculated based on the candidate’s experience and education.
As a job seeker, when receiving an offer whereby the salary is lower than your expectation, you should try to understand their pay philosophy. Companies might not be able to share all the information with you but you can obtain a better understanding of their pay structure if you pay close attention to what they offer during salary negotiation.
You should also consider the entire compensation package. Base salary is only one component so it is important to understand the other benefits or perks offered, such as additional allowances and bonus payout.
Most importantly, you should understand the growth opportunity within the organisation. If an organisation strongly believes in developing their employees, it will still be a worthy consideration over others that only offer a marginally higher salary.