Picture it: you have just concluded your interview and shaken hands with the ideal candidate who has all of the qualities and qualifications you are looking for in order to fill your open role and you quickly rush back to office to get in contact with your Recruiter to let them know you want to hire them ASAP! You are excited about the possibility of taking your department to the next level and want this candidate to be part of the team. At this point in the process, nothing else is standing in your way right?
Well if you consider the compensation package you plan on offering a non-factor than yes, you are clear and free. However, more than likely, you will find yourself in a situation where you will have to land on the magic number in order to land this ideal candidate. Given all that it takes in order to identify and interview the ideal candidate, it is important that you, the hiring manager, have a sense of how to handle the money conversation and tender the right offer that is both competitive and will not burst the department’s bottom line.
5 Ways to Best Determine New Hire Salaries
- Understand Current Salary Grade Information, Market Data and Offer Approach.
As a hiring manager, it is imperative that you are aware of the organization’s salary structure and the current salary grade or broad band for the job you are looking to fill. Knowing this information will give you an idea of how much you will be able to offer. It is critical that the Recruitment department is also very aware of this information during the phone screening portion of the process so they are not bringing in candidates that the company cannot afford. If you have any questions about the salary grade assignment, it is suggested that you work with the Compensation department and verify the benchmark data they used to market price the job. In order to ensure the correct benchmark data was used to price the role, make sure the job description is updated and reflective of any new skills, duties or minimum requirements needed to be successful in role. Many times this will have an impact on the market and internal value of the job. Once you are comfortable with the market and salary data, take it one more step and ask the Compensation team when the last time the salary structure was aged and how often it is aged. Confirming this information will give you the assurance you need to make a competitive offer and feel good about managing the compensation of the employee moving forward.
- Understand the Pay of Peers and Former Incumbents.
Now that you have an idea of the market and internal value of the role you are looking to fill, you should take it a step further and review the compensation of former incumbents, if that information exists, and the pay of others in the department and organization assigned to the same salary grade. Knowing this information will help you form an idea of how much to offer the candidate. Knowing the pay level, performance, experience and position within range of former and current incumbents will help you arrive at an offer that is considerate of the pay and experience of those who are currently employed by your organization and will more than likely be equitable. It is critical that government contractors adhere to this practice when making offers given the affirmative action guidelines and requirements set forth by the OFCCP. Additionally, making an offer that does not align to the candidate’s years of experience can lead to setting a bad precedent that the organization will have to manage around when looking to hire or promote in the future.
- Confirm whether if it is a Hot Job or Scarce Talent
Knowing whether or not the job you are looking to fill is a hot job or if the talent pool is limited might determine the competitiveness of the offer. If the Recruitment team is having a hard time locating talent to interview and subsequently fill your job, this might be an indication that the type of work you are looking to fill is very popular. This can happen if an industry starts experiencing a surge in demand for its commodities or services and there is a shortage of qualified employees needed to manage or produce a given commodity resulting in a bidding war on talent between companies. Hiring managers should be aware of any such trends prior to going to market for talent. In order to pique the interest of talent during the phone screening phase of the process, it might require that the company bump up the salary grade assignment for a given role and look at it valuing it higher than it currently is internally. In order to land highly sought after talent, the company should consider other forms of pay outside of base salary such as sign on bonuses, stock grants and perquisites to name a few. When the job offer process shifts in favor of talent, the organization will more than likely have to make compromises in order to get talent onboard.
- Pay Mix
If your company only offers guaranteed or base pay for the job you are looking to fill, you might want to check the market to understand if variable pay is being offered for this level and type of work. Variable pay is a growing trend and is being offered to many non-management jobs across all industries. A good majority of job seekers currently have a variable compensation opportunity that consists of some type of performance driven incentive or the opportunity to go above and beyond their normal body of work to earn additional compensation. It is crucial that you stay on top of this trend and design your compensation packages accordingly. If you do offer incentive pay for the role you are looking to fill, confirm that the current pay mix is competitive with market trends and be open either increasing the incentive opportunity if there are data that can support this change. Work with Recruitment to sell this aspect of the compensation package to prospects as well.
- Timing of Offer
Believe it or not, the timing of when you make an offer has an impact on the competitiveness of the compensation package. If the company has a merit and incentive process that is based on a common anniversary date with specific eligibility cut offs, then there is an opportunity to onboard your new hire prior to the cut off date and provide them with the potential of a prorated increase before their first full year of employment with the company. If the candidate knows that there is a chance they can recognize an increase in pay and/or receive a prorated incentive payment, this might entice them to consider the offer. Additionally, this might serve as a carrot for candidates to chase and give them incentive to work hard and prove to management they made a good hiring decision all while seeing an increase in pay shortly after arriving. Knowing the details of the pay program eligibility can actually be a strategy that management can employ to land talent.
Once all of the above-mentioned items have been reviewed and addressed, and you are confident with the compensation package you are offering, it’s time to make that phone call and welcome your new candidate to the team!