11 Mar 2020

How to Negotiate Compensation for a New Hire

One of the most challenging things a recruiter or hiring manager encounters during the hiring process is negotiating compensation.

Why are we qualified to share this information with you?  Connexis Search Group places over 150 molecular diagnostics and life science candidates each year.  Our recruiters go through the salary negotiating process at least five times per month.  The below information is based on real-life experience negotiating compensation.

Negotiating compensation never has been easy, and now it is more difficult for several reasons.   First, several states have made it illegal to ask a candidate about their current compensation, making for an awkward conversation.  Secondly, the incredible economy has made candidates realize they are in demand, so they are more guarded about giving their compensation to recruiters and hiring managers.  Candidates may not want to reveal their current compensation in hopes of drastically improving their financial situation.  

So, what is the best way to negotiate compensation?  It helps if you have a general idea of what the position typically pays. What are the typical base salaries and total compensation for existing employees of your competitors?  Several resources that you can use to determine base salaries are Indeed, Glassdoor, and PayScale. Having a general idea of what the candidate's base salary is before calling them helps you in deciding how much they currently make and what you may have to offer.  

Once you become interested in a candidate and you know you want to move them through the process, start talking about compensation.  Don't wait until you get to the offer stage to discuss compensation.  You might be wasting your time and the candidate's time if you're too far apart.

So how do you ask a candidate about their compensation?  If you've done your research, then you have a general idea of what the position pays.  In states where you can't ask for compensation requirements, the best thing to ask is what is their desired compensation. If you are working with a sales rep that receives a commission or a bonus, you can always request their desired base salary and their desired total compensation.  Once you have this information, you can determine if it will fit into the financial package your company currently offers.  Let's look at an example to clarify the process. Let's assume that your base salary is $115,000, and at a plan, a sales rep can make another $40,000 in commission. If the candidate you're interviewing states that their desired base is $120,000 and their total desired compensation is $160,000, then you quickly realize you're going to have to offer the top end of your base salary.   Investigate the candidate's total compensation by asking questions.  Do they consistently make $160,000, or was that one of their better years?

If you're using a recruiter, then negotiating compensation becomes easier.  A good recruiter will have taken the candidate through all the above steps, plus they will have industry knowledge about typical compensation packages.   Reputable recruiters advise you as to the required compensation that the candidate is willing to accept.  I realize that some people reading this article think recruiters want to drive up to candidate's base to receive a higher fee. Unfortunately, some recruiters are unethical and may do this.  I have two suggestions for you that will prevent this from happening.  First, pay the recruiter a flat fee, so the candidate's base salary doesn't factor into the fee. Secondly,  only use a recruiter that you trust, and that is reputable. 

Making an offer that is below the candidate's current compensation can sour the candidate on your opportunity.  The best way to negotiate compensation is to come to a verbal agreement.  Only send out a written offer once the candidate is agreeable. This method is the most effective way to finalize an offer. If you're working with a recruiter, they should be able to gain an understanding of the candidate's requirements and let you know how much the candidate is willing to accept. This way, you present one written offer, the candidate signs, and you have a new employee.

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