I get this question a lot! First, I want to point you toward a recent article written by Tom Cline, a business development advisor at Violand Management Associates. In that article, Tom makes the point that “competitive compensation practices are more critical than ever.” And he is right.
As I’ve written about in past columns, we are frequently speaking with candidates who already have job offers from other companies, and are in a position to choose the best offer overall. Think of this job market like a good seller’s housing market. When it’s a seller’s market, sellers often field multiple offers within just a few days, and are able to ask for “biggest and best” from any interested buyers. The same goes for prime candidates in this job market, although maybe a little less extreme.
Candidates with multiple offers in-hand are able to truly choose the best company and fit for them and their skill set, while negotiating for the best possible pay. While we would never suggest you try to pay someone more than you can afford, in this market you’ll need to be prepared to pay more than you have in the past for the same role. Yes, this might bring up some issues with your internal/existing pay scale and employees.
Here are some things to consider when trying to determine a pay range for a new hire:
What does your budget look like for the role? When was the last time you addressed what you pay new hires in this position? Is it perhaps time to reevaluate considering the current economy and hiring landscape?
Take a look at what your competitors are paying. There’s a good chance they have job ads out there right now too for similar positions; what are they willing to pay? The best candidates will be aware of what the competition is paying, and it’s possible they’ve even already interviewed with them!
Take into consideration the full earning potential of a position, and be sure to sell that to your candidates! For example, if you’re planning to pay a new project manager a base between $50,000 and $60,000 depending on experience, but they can make an additional $20,000 in commission depending on the amount of work they produce, be sure to share that information. What will it take to reach that $20K mark? Could they make more than the $20K if more is produced and/or higher margins? How many of your existing PMs make that kind of commission? Be honest and realistic about what opportunities there are on top of their base pay. For the real “go-getter” candidates, commission can be a great selling point.
Be willing to get creative when it comes to offers and negotiations. Don’t be offended if a candidate comes back and tries to negotiate for a little more in base pay, or something else. We’ve truly seen candidates weighing all the facets of an offer – the base pay, commission potential, cost of health insurance contributions on their end, car allowance, and other benefits. There are some great ways to get creative with offers to make everyone happy and comfortable moving forward, like increasing base pay while decreasing commission percentage for candidates until they have a steady amount of bonus being paid.
If you’re looking for some more information on the current hiring climate, this report can help! And, as always, we are here to help our clients make the most educated hiring decisions as possible, meaning we always have our fingers on the pulse of markets across the country and are happy to share what we’re seeing with you!