Are you loosing your offered candidates to your competition merely for few thousands? – Apply basics in Navigating C&B
After a tiring selection and assessment process, you think you have shortlisted a Rockstar. The salary that you plan to offer her is lower than what she expects. Do you throw in the towel and let her walk away? Or do you revise your offer?
Often, it depends largely on your company’s compensation philosophies and procedures (If you don’t have one, aspire to create one!). Mature organizations have salary ranges assigned to each position, based on role complexity and market dynamics and are reviewed periodically based on inputs from salary surveys, inflation, and demand for the role in the job market. All existing employees are also benchmarked to a PMR (Position to Median of the Salary Range). This is to ensure that two objectives. Your new employees get a fair compensation which is commensurate with their skills and market conditions and your existing employees are paid fairly considering the same factors so that you do not lose them for compensation related reasons.
Having said this, there are other factors to consider when offering compensation to a new hire. One important factor is “Internal Parity”. Simply put, it means that if two employees having similar skill sets within the same function/project are performing the same role, one shouldn’t make INR 400,000 per year while the other is making INR 700,000 per year.
There has to be a balance between what you can afford to offer candidates and what candidates are bringing as advantages to the organization. If they bring unique skills that are significantly different from others, then offering them more salary is justified.
Whenever you’re hiring someone from outside the company, you want to evaluate all the factors and take a high-level overview of:
What is the candidate is bringing to the table?
What are the needs of the role being hired for?
What is the budget?
The key factor to consider is how not to lose your perfect candidate when negotiating salary. A lot of times candidates are lost for gaps in salary (between what is offered and the expectation) that’s only between Rs.20,000 and Rs. 50,000 annually —which is about 30 cents an hour. Does one really want to lose an ideal candidate over 30 cents an hour?
Here are a few basics to negotiate compensation the best way going forward:
a) Offer your best salary in the first instance and DO NOT revise offers.
Whatever you’re going to offer—you want to make sure you’re putting your best foot forward. Simply put, if your candidate is currently making Rs. 500,000 per year and is asking Rs. 650,000 per year. If your budgets allow you to go upto Rs.650,000, then please make that as your first and only offer.
Revising offers erode your brand image which is more detrimental in the job market and create a lot of process inefficiencies in the form of approvals and re-rolling offers which erode profitability and create lost opportunities.
b) Where internal parity is breached, try giving marginal increases demanded in the form of sign on bonuses with clawback clauses as to retention.
c) Try explaining benefits – Identify the bright spots in your company’s benefit plan.
Employer-sponsored benefits, such as health insurance, transport allowances/facility, cellphone reimbursements, data plan reimbursements, lunch coupons, staff welfare benefits vary wildly from company to company. Please invest in identifying how the industry and competition fares in areas like these and sell your company’s career as a total package.
See if there are possibilities of offering flexibility in the person’s work schedule, such as working from home two days a week, which can help off-set the cost of commuting and can be very appealing to some candidates (particularly young mothers).
However, you should look at the non-monetary elements only if you can’t afford candidates’ minimum salary expectations.
d) Have well defined Walk-away points —not the minimum you can pay, but the maximum
Some closing inputs:
When it comes down to generating an offer letter for your candidate, there shouldn’t be any surprises. Have conversations about compensation with the potential candidate up front, keeping things as transparent as possible.
If you did not know the market median compensation for the position you’re hiring for, you can seek research inputs on compensation and benefits for each role by the company or company type (Tier1/Tier2/Tier3/startups/product captives).
Invest in understanding what’s important to your applicants and what their key attractions are. You will be able to put together the best compensation package the first time. With this, you don’t even have to negotiate.
Happy negotiating and hiring!
To know more about how Han Digital can help you benchmark compensation for roles and research surrounding supply of talent for roles that you are hiring for, do drop a line to email@example.com