Closing an Offer: Salary Negotiations

Posted by Mauri Schwartz

November 08, 2012 @ 10:59 AM

(This is the second in a series of three blog posts to help recruiters and hiring managers seal the deal. The first is Avoid Last Minute Surprises:  What’s Your Competition?)Recruitment, Salary Negotiation

As I mentioned previously, the process of closing an offer with a candidate starts at the beginning of the recruiting process.  In addition to being aware of a candidate’s other job options, you really must have a clear understanding of the details of her compensation – current and expected.  I say “details” because compensation consists of many components.  Gathering the following information will help you understand what kind offer you will need to make to cinch the deal. 

Current Base Salary 

  • If you ask for a candidate’s current compensation and she replies with a single number, follow up with this question to clarify, is that your base salary or does that include a bonus?  

  • Ask the date and amount of her most recent salary increase, and possibly the one prior to that.  

  • When is her next increase anticipated?  Can it occur prior to a typical 12-month cycle?

Variable Pay / Bonus 

  • Most often bonuses are stated in terms of a percentage of base salary, but not always.  If you are given a dollar figure, ask if it is a fixed amount or calculated as a percentage.  

  • Ask if the bonus is constant or variable.  Most are variable and are based on performance, either the company’s performance, the candidate’s personal performance, or a combination.  What is the breakdown?   

  • How frequently is the bonus paid – annually, quarterly?  When is it paid?  Many companies pay bonuses based on the previous year’s performance in the first or second month of the subsequent year.   Must she still be an employee to receive it?  You may need to compensate for any money left on the table if she leaves prior to bonus payment.  

  • If the bonus is calculated at x% to be paid if a specified target is reached, ask if it can exceed that number if the goal is surpassed.  I recently asked a candidate these questions and learned that the firm had exceeded targets for a number of years and bonuses had been paid out at as much as twice the anticipated amount.  

  • What is the history of bonus payment?  How much did you receive last year?  The year before?  What do you expect this year?  

401k / Pension Contributions 

  • These plans vary considerably and you will need to know how much the employer matches, the percent and the maximum.  

  • Also ask if the candidate takes full advantage of the maximum employer matching contribution.  If not, this component may not matter to her as much as others.

Stock 

  • Stock benefits may come in the form of shares, options, restricted stock units, and/or an employee purchase plan discount. 

  • Often this category is more difficult to quantify, especially if it includes options in a startup.  Who knows if and how much options are really worth?  

  • What is the vesting period, if any?

Sign-on Bonus / Relocation Reimbursement 

  • Has the candidate has received any hiring bonuses or reimbursement of funds paid for relocation?

  • If so, ask if there is a tenure requirement.  Most firms require the employee to stay at least a year, often longer.

Vacation / Paid Time Off 

  • You know what they say, “time is money.”  

  • Is there a distinction between vacation and sick time or are they lumped together into a single category “paid time off”?

  • How does what she is receiving now compare to what you can offer?  

  • Is this issue important to her?  Many employees say they are willing to exchange salary for time off.

Other Cash Payments to or on Behalf of the Employee

  • Contributions to medical and other insurance:  Does the company pay for the employee only or the entire family?

  • Are there any other benefits such as education reimbursement, free gym membership, or product discounts?

  • Does the company match contributions to the candidate’s preferred nonprofit causes?

Counter Offer 

Does she think her company will attempt to keep her by offering a financial incentive to stay?  (My next blog post will discuss how to respond to counter offers.) 

As the interview process moves along, you should periodically reassess this information and beware of changes.  Has she received an increase or a bonus since the process began?   Or has she been inconsistent with the information she has provided? 

Finally, when the time comes, as much as possible, package an offer that takes into account the priorities expressed by the candidate during these discussions.  What did you learn about what she values most?   Which is more important to her – guaranteed cash, incentive based compensation, stock, medical benefits, education reimbursement, commute, flex time, time off?

 

Mauri Schwartz, Recruitment

Mauri Schwartz is President of Career Insiders, a career management and talent acquisition consulting firm, and is a leading figure in the San Francisco Bay Area career management community.  She is a frequent speaker at conferences, job fairs, and career panels and serves as Adjunct Advisor of Career Services at the Haas School of Business, University of California, Berkeley.