For many organizations, determining a set compensation package for each job title is a significant and time-intensive role of the HR department. Assuming that you don’t have this set package to work from, however, how might you go about deciding how much to offer a new hire? Here are a few tips to keep in mind, based on material in my book Success for Hire.
- Be competitive: Use industry and local market comparison studies to make sure your compensation is in line with that of similar organizations with similar positions.
- Align pay with your goals: If you’re charged with developing a highly skilled, outstanding workforce, you must pay above industry or regional averages to attract the quality employees you seek. If, on the other hand, the strategy is to get cheap labor in the door quickly with little regard for turnover, you can pay people less.
- Practice equality: If you already have people working in the same function as the candidate, you should be offering a salary in line with what your existing employees are making. Taboo as it may be, issues of pay are often discussed in the workplace, and the last thing you want is for one of your best people to find out that the new hire came in earning $15K more.
- Know the value of the whole package: Benefits, especially healthcare insurance packages, have never been pricier, and how competitive your offerings are can and should affect the base salary you’re willing to pay a candidate. You must understand how much it costs you to provide certain benefits to your employee, and pass that knowledge on to the candidate during negotiations.
- Don’t use a poor economy as an excuse to pay less: You don’t want to get too far out of line with what you would have paid that employee during better times. You risk losing her when the economy improves. She may never feel valued by your organization if her pay is out-of-line with her experience and contribution. She may never really stop her job search, using your company as a resting place until the right offer arrives.
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