How to Determine Appropriate Compensation

November 6th, 2015

You’ve completed a resume review and several rounds of interviews, and you’re ready to reach out to your chosen candidate. You have a primary contender in mind, plus two back-ups if your first says no, and all three are likely to fit the position and serve the company well. Now that you’ve found your candidate (and runners up), it’s time for the next step: assembling your offer. You need to open the negotiation by presenting a number that’s high enough to close the deal, but not high enough to leave money on the table. Here are a few moves that can help you identify that number.

Conduct research first.

A quick trip to the internet (and your own in-house experts) will start you down the right path. This move is by no means conclusive; the internet may set an average compensation bar for a candidate with this amount of experience, but that doesn’t mean your job is done. Popular salary sites can do two things: they can present you with a wide ballpark estimate, and they can provide a sense of what your candidate knows and expects. (Both of you will surely visit the same sites.)

Recognize that the candidate and the company use different metrics to determine salary.

Your salary offer will be based on two primary factors: the rarity of candidate’s skill sets (her replaceability), and the monetary value she brings to the company. If her actions bring a flood of revenue, some of that revenue should be returned to her. And if her skills are hard to find, you’ll need to stretch to keep her on board. But recognize that her metrics are different than yours. Unlike you, she’ll also be factoring in the cost of her commute, her childcare needs, the other offers she’s fielding, her previous salary, and the amount she needs in order to live the life she wants.

Ask for previous salary figures, but don’t expect an answer.

Ideally, most employers would like to pay their candidate exactly what she made at her last job, plus one dollar more. This usually represents the minimum offer that can be placed on the table. Anything less and the candidate will simply walk away. Anything more may be unnecessary to landing a yes. But recognize that if you ask for this data point, the candidate is not obligated to respond. Most savvy candidates will offer a preferred range instead.

Pay more to get more.

Nickel-and-diming your candidate may look like a thrifty move on the surface, but the long term matters more than the immediate moment. Unhappy employees disengage and eventually leave. But if they’re paid well, unhappy employees often stay, struggle through the hard times, work to impress difficult bosses, and search hard to find value in the enterprise. Err on the side of retention, and make sure that your offer is generous enough to keep your new employee loyal when the going gets rough.

For more on how to crunch the numbers and arrive at a salary offer that bring your candidate on board—and keep her there — contact the staffing team at PSU.

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