Determining the desired salary range for your employees is a valuable first step of the hiring process. Crafting a salary range gives the employee clarity and ensures new hires are comfortable with the salary and benefits. To streamline salary selection, take stock of the proven techniques for this process.
This article will cover the basics of determining the desired salary range for your employees, and will help you understand the factors that go in to employee salary negotiations (from the employer’s perspective).
What is the desired salary?
The desired salary range is the amount of money you would want to be paid for a new employment. When filling out job applications and attending interviews, it’s usual to be unclear about what to enter for the desired pay. If you choose a figure that is too low, your employer may gladly accept it and pay you less than you are worth. If you quote an unrealistically high desired wage, you risk losing the position.
It’s critical to have a good plan in place for handling the issue of your desired wage, so you can quote a figure that will likely obtain you appropriate remuneration for the position.
When it comes to pay, you as a candidate have a few options. You may address it directly by providing a range, provide some more negotiating flexibility by allowing for non-cash compensation in addition to pay, or try to avoid the subject in the meanwhile (based on where you are in the interview process).
Here are some pointers for any of these techniques.
Give a range
Offering a range allows you and the company more freedom and may feel more comfortable than giving a firm figure. When you give a range, bear in mind that the employer may offer the low end of the range, so make sure your target figure is near to the lower end of the range you offer. You should also keep the range reasonably narrow, with a maximum variance of $10,000.
Include non-cash bargaining options
Non-cash benefits, perks, or compensation such as work-from-home options, flexible hours, benefits, bonuses, equity, stock options, student loan assistance (an increasingly common perk as more employers seek to attract debt-laden graduates), and grad school assistance may be options to help you and the potential employer reach an agreement that works for everyone.
Avoid answering the question
If you’re still early in the hiring process and still learning the intricacies of a role’s tasks and expectations, you may want to postpone the salary discussion until later. Keep in mind, though, that you will ultimately have to talk about salary, and you will want to have a well-researched amount in mind.
Examine your compensation expectations
Before deciding on a desired salary range, it’s a good idea to research what others in your position and sector are earning. Fortunately, there are certain programs that make this really simple.
These free salary calculator tools and reports will show you prospective incomes for your job and expertise, as well as allow you to modify variables such as location and industry. These are useful for setting a baseline for pay discussions or evaluating what the compensation may be for a role that isn’t included on the job post.
Identify Open Positions
Start by determining which positions you must fill and identify the skills required for those positions. Determine how many hours you expect the person to work. If you are hiring a daycare worker, this number could be up to 60 hours a week, and a company executive would likely only require about 20 hours per week. Calculating this number will give you a target range for the number of hours each position requires.
Have a Budget for your Desired Salary Range
Next, determine how much you can afford to pay an employee. Review company profit margins. Consider the employee’s position in the company and your salary budget for each employee and their salaries. If you don’t have the budget for the target salary range and employee profile, you may have to reconsider your selection.
Stay Competitive
Once you’ve decided how much you’re going to offer an employee, it’s time to analyze your competition. What are other local businesses in your industry offering employees in similar positions? This corporate analysis can help you stay competitive in a booming labor market. Even if the job at your business is slightly different, take the good salary range of your local competitors into consideration.
Some employers offer a salary range 10-to-20% higher than their main competitors in the area. They hope to attract candidates who are more financially minded than they are focused on the working environment alone.
Location
Location independence plays a huge part in determining how much people can earn as well. For example, employees in New York City, where rent is high and everyday items such as food and clothing are also very expensive, will require a higher salary than those living in smaller towns across the country.
Rates
There are three scales for determining what an employee should cost: market rates, competitive rates, and below competitive rates. Understanding which one applies in a given situation will allow you to make the best decision on how to proceed with interviews and compensation negotiations to get a desirable outcome.
Market rates are determined by job postings, surveys, and other relevant sources of information and dictate how much someone could potentially earn in a given position taking into consideration their experience level.
Competitive rates are based on the salary someone would make in another comparable position that falls into the same market rate category. This rate may be slightly lower than the job posting rate but still competitive for the industry or region.
Below competitive rates are your ideal starting point for new hires who have little experience or require specialized training.
Taxes
A final note about calculating salary ranges – do not forget about taxes! Make sure that when calculating salary ranges that this expense has been included in your accounting.
Tips for Talking About Your Desired Salary Range
These pointers will help you discuss your income more comfortably:
- Maintain your confidence. If you appear unsure, the recruiting manager may use this as a chance to negotiate a significantly lower wage. Display a self-assured demeanor that expresses your knowledge of the value of your job.
- Use a wide variety. Providing a wage range, with your desired compensation near the bottom, allows both sides to negotiate.
- Respond with your own questions. If you’re asked about your pay range during an interview, you can respond with your own questions. “ I usually don’t talk about my desired salary until I get a job offer; is that the case here? “You might also inquire about bonuses, commissions, or other types of income.
- Give a reasonable pay. If the potential company is unable to fulfill your desired wage, the position is most likely not a suitable fit for you. Maintain a range that you are comfortable with.
Summary
Determine your desired salary range based on all three factors: the general budget set by the company; the market value of the position; and the skills of the applicant. This will help you cover all bases and manage company growth needs moving forward.
Watch your spending closely. If you find you’re way over budget on a salaried role, it’s time to reevaluate your expectations. Remember: in-demand skills are worth more money. If your applicant has skills that are unique or rare, then they could hold significant value to your business beyond their initial role.
Lastly, remember that once an offer has been made you cannot easily rescind your salary offer. So avoid offering a salary until you have a clear indication of the employee’s potential value to your business. If they’re someone who excites you, make them an exciting offer in response.
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