After entering “how to negotiate salaries as an employer” into the Google field, the number one result is how to negotiate with an employer.
The above sentence is undoubtedly illuminating, shedding light on the environment and landscape employers must contend with.
Owners, executives, presidents, directors, and HR leaders don’t have all the answers at their fingertips. Instead, they must rely on experience, accumulated knowledge, and fine-tuned instinct to handle complex matters such as negotiating with candidates.
While often overlooked, the question of how to negotiate salaries as an employer deserves and requires a deep dive.
There’s a need to achieve a copacetic, optimal dollar amount that pleases both sides, which will look different depending on the candidate and their sought-after position.
Stellar negotiation techniques can help land the most desirable candidates at a salary promising to yield substantial returns for the company.
On the other hand, an absence of a negotiation skillset can adversely impact a company’s long-term prosperity.
As such, learning the finer points of salary negotiations as an employer should be a top priority for bosses in all industries and sectors.
The Complex Nature Of Salary Negotiations As An Employer
What can go wrong when negotiations don’t go well with a desired candidate?
Say a candidate takes the job after being rubbed the wrong way during salary negotiations, a more frequent occurrence than most would admit. Right away, the professional relationship will start off on the wrong foot.
The newly employed talent will likely have their eyes on a new role before their first day. They’ll work, doing what’s necessary (even performing admirably) until something new comes along–which won’t take long.
Most frequently, hires are made to fill a vacancy left by someone else. In these scenarios, companies have already faced employee turnover costs.
Consider these stats: It costs 150% (or more) of a mid-level employee’s salary to replace them.
Furthermore, replacement costs 400% of a highly specialized or high-level employee’s annual salary.
When a new hire leaves a year (or less) after they’ve replaced someone else, it doubles down on those exorbitant costs highlighted in the above paragraph. Alarmingly, it’s a realistic scenario of how poorly executed negotiations could play out.
Employers will also scare off the best candidates when their negotiation techniques are substandard or if they’re not open to negotiations at all. The best people won’t settle for anything less than they deserve because they know dozens–if not hundreds–of other employers will gladly pay them what they want.
On the above note, most experts point to passive candidates as the best–the cream of the crop.
These are individuals with positions they enjoy, and they’re getting paid well. An unwillingness to negotiate or clumsiness in negotiations is a red flag, and a passive candidate will simply stay in their role.
Furthermore, the more rigid an employer’s negotiation tactics, the more challenging it will be to hire a difference-maker. Also, the longer a vacancy exists within an organization, the more productivity issues persist, causing inefficiencies and lost opportunities for business growth.
Therefore, a gap must be filled, and it must be filled pronto.
Poor hiring decisions are often made under these constricting conditions, where backs are forced against walls.
Here’s where the damage can be most significant. Bad hires can cost around 30% of that candidate’s salary in their first year.
Should Employers Negotiate Salary?
Yes, employers should negotiate salary.
First and foremost, a copacetic negotiation process gets things started on the right foot with a new hire. Negotiations are–in many ways–the first step of the onboarding process, which can spearhead an 80% boost to new hire retention.
While some employers might hesitate to negotiate with employees, those very bosses rob themselves of many advantages.
Namely, an aversion to negotiations will take employers out of the running for top-tier, difference-making candidates. It’ll also keep them unaware of competitive salary trends in their given industry, a stifling disadvantage across all sectors.
Firsthand knowledge of the salary and contract-based expectations of talents in specific positions–insights ascertained through negotiations–offers an intrinsic competitive advantage.
Another benefit employers will experience through negotiations is learning about the candidate and how they’ll approach their role. The potential hire might–for example–prove to be a savvy negotiator, a skill lending itself to a leadership position.
7 Helpful Tips To Negotiate Salaries As An Employer
This section will examine seven valuable suggestions on how to negotiate salaries as an employer.
1. Balance Budget With Competitive Wages.
Unfortunately, businesses don’t have carte-blanche to throw everything (including the kitchen sink) at a new hire–even the most desirable candidates.
At the same time, there’s a need to make room in a budget to fit the company’s needs. Employers inevitably get what they pay for. An unwillingness to loosen financial belts when it’s time to make an impactful hire, regardless of budget, means long-term company objectives won’t be met.
Plainly put, striking this balance has its stumbling blocks and complexities. It’s equal parts art, math, and science. Numbers must be crunched. Projections must be calculated. Strategies must be honed.
Depending on a candidate’s potential value and the vacancy’s significance, taking on a certain level of risk might be necessary. For instance, a company with a limited hiring budget might need to examine financing through business loans to make things happen.
Of course, the opposite end of the spectrum is to know when someone is asking for too much. Breaking the budget on a short-sighted, ultimately doomed hire would be highly problematic.
Asking big-picture questions is of the utmost importance during the negotiating process. How much could paying more now help later? How much could offering less limit future growth?
These factors must be weighed against the overall quality of a candidate and the broader value of their potential role.
When all is said and done, negotiations should result in a satisfied employee who feels they’ve received a quality offer and a budget that’s remained unbroken.
2. Perform Thorough Research
A well-rounded understanding of competitive industry salaries will help shape an employer’s successful negotiations with a candidate.
Most crucially, a firm grasp on competitive salaries for a given role helps employers form a hiring budget that makes sense for bosses and candidates alike.
Knowing these stats also provides perspective during negotiations. For instance, an employee negotiating for substantially more than industry averages is sending one of three messages:
- They’re an industry-leading candidate.
- They’re bold and pushing for as much as possible.
- A combo of 1 and 2.
Additionally, insights into average salaries can help set thresholds.
Employers will better understand what constitutes expensive (even preposterous) without coming across as inflexible or unwilling to pay talent what they deserve.
Remember, too, that passive candidates or those with other offers on the table have nothing to lose by asking for the world on a platter, which is their prerogative.
Similarly, it’s an employer’s prerogative to say no to an unreasonable ask–and knowledge of competitive salaries offers the steady ground to do so with the utmost confidence.
Explore job postings from other companies in a similar industry or parse crowdsourced market data to learn about competitive salaries.
Consider also speaking with field-specific recruiters and asking about the standard offers their clients encounter. Given the nature of a recruiter’s work, they’ll have immediate, real-time data.
3. Get Familiarized With State Laws.
Ethics and legality should be top of mind when negotiating with a potential new hire. Keeping things above board is always the ultimate failsafe regarding running afoul of law enforcement and labor boards.
Sometimes, the difference between an ethical/legal landmine and obtaining firm footing during salary negotiations can seem invisible.
For instance, it doesn’t seem unreasonable–on the surface–to ask about a candidate’s prior salary while negotiating with them. Theoretically, it should help lay a framework or foundation for a reasonable offer that satisfies everyone’s expectations.
However, laws throughout many states dictate that employers cannot ask such questions. It’s a matter of privacy and is viewed as an infringement on workers’ rights by many lawmakers and legislators.
Thus, many hiring experts suggest researching state and regional laws to ensure such salary-based questions are allowed.
4. Learn What A Candidate Expects To Be Paid ASAP
Learn a candidate’s salary expectations ASAP–ideally, when interactions begin during the introductory email or phone call, if possible.
Say a candidate’s salary expectations/demands far exceed what an employer can pay. Wouldn’t it serve that employer best to know immediately before going through–and inevitably wasting time during–an intensive interview process?
Yet, employers fall into the above trap far too often.
They think they’ve found their dream candidate, performing multiple interviews with them, only to realize the two parties are too far apart for a hire to be made.
It’s worth noting how candidates often demand an overly high salary as a negotiation tactic. They’re asking for more with the expectation of receiving less. Working through this back-and-forth jousting ASAP can help mitigate unfortunate turns of events or about-faces once the hiring decision is made.
5. Keep Tabs On Company Salaries To Avoid Discrimination
In modern times, employees discuss their salaries. It’s a massive cultural shift from a few decades ago when it was considered crass to converse over such matters.
Thus, an employer’s awareness of who’s being paid what is pivotal. Someone’s bound to learn if a colleague in a similar role is getting paid more.
These situations can turn ugly if employers aren’t careful. They can even spiral into discrimination accusations.
For instance, research shows that 2.5 more women hesitate to negotiate salary than men. This can result in men getting paid more than women throughout the workplace, irrespective of skill levels and productivity rates.
None of this section is written to discourage employers from negotiating with candidates. Rather, it’s meant to raise awareness, emphasizing the importance of staying on top of salary-based trends.
6. Be Transparent About Salary Ranges.
It’s not always appropriate or applicable to publish a salary range, especially for executive-level hires.
Alternatively, publishing salary ranges for entry and mid-level roles will save employers from headaches, disagreements, and complications during negotiations with potential new hires.
Those deeming the dollar amounts too low won’t apply. Those who view the salary ranges as appealing will apply in droves.
After publishing salary ranges, employers might encounter one frustrating issue–receiving applications from underqualified candidates looking for a pay bump. Fortunately, most companies have vetting and screening processes to weed out these individuals.
7. Think Beyond The Dollar Amount
It’s cliche to say this, but it’s no less the truth: Money isn’t everything.
Some employers don’t have the budget to make jaw-dropping offers to top-tier talent. Yet, they can sweeten the pot with additional benefits.
Benefits are a significant component in job satisfaction, according to 60% of SHRM survey respondents. Thus, tapping into benefits can beef up a job offer that doesn’t quite stack up in dollars.
Creativity is an employer’s best friend when offering benefits. Unlike with money, few boundaries exist in how they’re incorporated into a compensation package. Consider offering remote work options, extra paid time off, continuing education opportunities, etc. Examine trends and learn which benefits speak most to modern candidates.
Salary Negotiation As An Employer: Closing Thoughts
Do employers have to negotiate with job candidates?
Technical speaking, no–an employer doesn’t “have to” negotiate with a candidate.
It’s possible to be rigid and not budge. Employers can tell a candidate to take a hike the moment they mention the prospect of negotiations.
Just because something is possible doesn’t mean it’s a good strategy. Refusing to negotiate with job candidates is an approach that neglects the big picture.
In a job market more favorable to workers, employers often need to meet new hires in the middle. Today’s professionals have leverage and are skilled enough to back themselves and look for work elsewhere if they don’t feel they’re being treated fairly.
Employers who embrace this shift are the ones who’ll remain ahead of the pack. They’ll make the best hires and have top talent on their side, driving profits and igniting exponential growth.
Yes, negotiations remain a balancing act. Employers can’t afford to pay more than makes sound business sense. Nor can they afford to offer less.
Fortunately, following the tips in this article will help employers achieve balance, ensuring bosses and new hires exit salary negotiations as winners.
