Negotiating Salaries: 5 Tips for HR Leaders
The internet is full of blogs and articles coaching employees and job candidates through salary negotiations, and for good reason: what can feel like a simple budget line item for a business can be a life-changing conversation for an employee. HR leaders need to know how to approach these conversations so that employees feel cared for and respected while ensuring the company can still meet its objectives and financial obligations.
It’s not a question of if employees or candidates will try to negotiate their salaries, but when. One survey from Payscale found 37 percent of workers had asked for a raise from their current employers. A further 42 percent of job candidates have asked for a higher salary while negotiating a job offer. So how do you approach these conversations both compassionately and pragmatically? Is there anything you can do to retain employees seeking a higher salary if the answer is no?
Here are five tips every HR professional and leader should know about salary negotiations.
1. Know and Explain Your Total Compensation Package
Preparing for salary negotiations starts by understanding all aspects of your total compensation package. Once you understand your organization’s compensation strategy and the overall budget, you can answer this crucial question: How much can you realistically negotiate salary? A limited pay range doesn’t have to be the end of the conversation—as long as you address the concerns that led the employee or candidate to start the negotiation.
The answer doesn’t always have to be a higher salary. Companies have a lot of leverage with their total compensation package, and there are creative ways to approach compensation that can help employees feel satisfied. Having a comprehensive compensation strategy in place before you start negotiating salaries with employees or candidates will help streamline these conversations and improve your ability to keep employees happily engaged.
So what can you offer as part of a valuable total compensation package?
- Flexible PTO options or additional PTO days
- Flexible work schedules
- Remote work or hybrid work options
- Relocation packages
- Commuter benefits
- Health and wellness benefits
- Tuition or continuing education benefits
- Child or dependent care support
Creating a valuable compensation strategy hinges on understanding what matters to your employees. Not every benefit matters to every employee, but you can tailor the package and your approach to meet their preferences. Once you understand their needs, you can communicate the value of your total compensation package to both current employees and prospective candidates, whether or not they’re asking for a higher salary.
Don’t just compete for talent. Wow them with a rock-solid compensation strategy.
2. Be Honest and Transparent About Salary
Because of longstanding taboos against discussing other people’s income, it can be difficult to get everyone on the same page when it comes to fair compensation. Employees rarely feel like they understand the reasoning behind salary decisions and often don’t know how their salary matches up with others on their team.
This can make it nerve-wracking for an employee to ask for changes, and many employees are finding it much easier to simply switch jobs. In 2021, 63 percent of employees reported leaving their jobs because of low pay. But other top reasons for leaving included a lack of upward mobility at their current job and not feeling respected, so clearly salary isn’t the end-all-be-all of retaining employees. Even if a salary negotiation with a current employee or candidate isn’t able to match the salary they’re requesting, you can still overcome many of the reasons employees might want to leave.
Be clear and upfront about salary expectations, and show employees how your company helps them grow. Share with them a clear path to promotion and what types of salary increases can be included as they grow in the company.
When you explain the “why” behind your decisions and do your best to meet reasonable requests, you can help employees feel heard and respected. Pay ranges are aligned to the role and its responsibilities, not to the person filling it. Let them know your market research and why you landed on a specific number.
Again, be transparent about how the entire compensation package relates to the company’s mission, purpose, and culture. While it may not be as strong a driver as pay for employees, it will matter and help you explain why and how specific salary decisions are made.
3. Leave No Question
The end goal of a successful compensation conversation is to clarify expectations, so the employee or candidate can make a fully-informed decision. Transparency on your end goes a long way toward this understanding, but you’ll also need information from their side to fully align on their future employment.
Here are some areas you should research in preparation for compensation negotiations, so you can stop misunderstandings before they start:
- Job Title & Description: Make sure your job titles and descriptions are targeted to the candidate pool. They should not only match the qualifications you want but also the compensation expectations candidates have for the qualifications you require. If there’s a disconnect in those areas, review what you’re asking for and how much you’re willing to offer.
- Candidate History & Expectations: Consider where candidates are coming from. If they’re coming from a company known for offering salaries at the high end of the salary range while your compensation strategy sticks to the middle, you’ll likely have an instant disconnect between what they will be expecting and what your company can offer.
- Employee Needs & Values: Understanding what is important to your current employees and how you’ve linked what they value to their compensation will give you a solid starting place for a salary discussion. Tools like employee satisfaction surveys help you proactively adapt your compensation plan and other policies to grow in the same direction as your employees.
- Why People Leave: Learn from your exit interviews. Ask about their decision to leave, including what made them want to leave, the offer that convinced them to leave, and how you can improve your workplace for future employees.
Evaluating your approach to salary negotiation and preparing for a variety of outcomes can help you feel confident going into the discussion, so you aren’t caught off guard. By critically thinking through these factors and others, you can stay on the right path for salary negotiations and expectations
We surveyed 1,000 employees in the U.S. about their compensation and what they want from employers. Here’s our comprehensive free report.
4. Understand Your Constraints
Some employees or candidates may decide to walk away. That’s OK; if their employment with you isn’t meeting their needs, it will be challenging to keep them engaged and motivated. But deciding to part doesn’t have to be the end of the conversation. You can work out the details to minimize hard feelings and leave the door open to the potential of a boomerang employee.
An employee departure is the time to start the ideal transition for your organization and agree on the length of a notice period. For hard-to-replace employees, this could include a one-time retention bonus for them to stay on for an additional month or two while you find and train a replacement. In the end, though, the employee has the final say of when they need to leave.
Don’t be pushy. Convincing someone to take an offer they won’t be happy with won’t create a positive long-term solution for the company or the employee. Employees don’t just want money now; they want a career that promises more in the future. And short-term wins, like giving an overly high salary to a valued employee or candidate, could cause detrimental long-term problems for your company, like employee dissatisfaction, issues with pay inequity, and a struggle to sustain above-market salaries.
When you’ve done your research, shared the value of the total compensation package, and know what’s important to your employees, you know you’ve done all you can to keep the employee engaged. Knowing where to draw the line on salary negotiations ensures you can provide competitive staying options while keeping the company’s overall objectives squarely in place.
5. Keep the “Human” in Human Resources
One of the most important steps to making sure employees feel heard and respected in a salary negotiation is to continue to act like a human being. Be real, candid, and empathetic during compensation conversations. Using the ideas from the previous tips helps make sure the employee knows you respect them as an individual instead of seeing them as a replaceable cog in the machine. Pairing your words with a consistent employee experience helps drive this home.
Even if employees and candidates don’t get the higher salary or they choose to walk away from a job offer, they’ll remember how your company handled the conversation. Being human can be the difference between re-energizing an employee or seeing them leave, between a candidate choosing your company over similar options, or between scathing and glowing reviews from former candidates and employees.
Bonus Tip: Use HR Software to Prepare for Salary Conversations
As with any job you want to excel at, you need the right tools in place to help you succeed. When negotiating salaries, having a good HRIS tool can go a long way. You’ll need a tool that includes the necessary information and data to help you be more prepared for salary conversations, including:
- Employee sentiment
- Compensation and job history
- Employee demographics
When you gather all this information in one place, you’ll be able to sit down and talk with employees with empathy leading the conversation and data backing you up.