How and why does the company get a salary?
Jeff Altman, Big Game Hunter
Salary negotiations can put pressure on job seekers. When you receive an offer, you naturally want to know how and why the company has proposed that particular number. Asking the right questions can provide valuable context and information to help you respond.
What factors does the company consider?
Several elements play a role when determining salary offers:
Market Price – Companies review competitive wage data to see similar roles paid by other organizations. This provides a baseline for calibrating its own range. Resources such as Payscale, Salary.com and industry associations provide benchmark information.
Internal consistency – Analyze salaries for identical or comparable positions within the organization to ensure consistency. A huge difference between employees with similar experience and responsibilities can lead to retention issues.
Budget – Each department has a certain budget for compensation. Offers must be consistent with leadership’s financial possibilities and approvals. A budget is usually set every year.
Candidate Background – Your specific skills, qualifications, experience and educational factors. Roles that require high expertise often occupy higher salaries.
Value to the organization – The more important the role is to achieve business goals, the more companies may invest in to attract and retain the people with the highest performance.
Growth Potential – If the position provides obvious opportunities for improvement within the company, the basic offer may start at the lower end.
Location – Adjust salary based on geographical location and cost of living. The same role pays differently in New York than Boise.
Negotiation Scope – Many companies have budgets 3-5% higher than the initial offer, knowing that candidates will object. They leave room for negotiation.
How should you ask about salary?
When the offer comes in, resist the urge to react immediately. Here are some effective ways to discuss the components of a quote:
- “I’m very excited about this opportunity, but want to better understand how you get to your proposed salary. Can you take me into consideration?”
- “The offer is close to my expectations. How is the salary for this position determined for my own understanding?”
- “I appreciate this proposal. Since the cost of living varies greatly between regions, can you share some insights on how to consider the location?”
- “The salary range seems to be consistent with my research on industry standards. Are there other benchmarks used when creating this offer?”
- “Thank you for your suggestion. I would love to hear more about how my qualifications contribute to this level of compensation.”
Avoid building problems in adversarial tone. You are seeking information, not negotiating (not negotiated yet). A complete explanation is carefully observed without judgment.
Key follow-up issues
A deeper study of some targeted follow-up issues can reveal key details:
- Is starting salary flexible or is this company?
- What are the performance metrics and schedules for salary review and increase?
- How are bonuses and equity compensation factors classified into total rewards?
- What is the salary growth trajectory for the highest performers in this role?
- Does the company offer benefits such as signature bonuses or relocation packages?
The company’s response allows you to clearly state the offer and whether it matches your expectations. With this information, you can determine the next step in accepting or negotiating the final deal.
To be straightforward can lead to more productive conversations around the offer. Make sure the company provides the context you need to properly evaluate your salary offer before moving forward.
ⓒBig Game Hunter, Inc, Asheville, North Carolina. 2023
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About Jeff Altman, Big Game Hunter
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