How to Negotiate Salary with Employees 

February 13, 2023
minute read

One of the most important aspects of the onboarding process is agreeing on appropriate compensation for a new employee.  

After all, granting fair salaries to employees while remaining within budgetary restrictions helps you balance staff retention and your company’s finances. There are ways to conduct a conversation about salaries in a way that’s both ethical and respectful.

The Purpose of Salary Negotiation

Talented candidates seek out positions that give them the fairest value for their experience and skillset. Top talent will have numerous job opportunities at their doorstep. That said, salary is often the most prominent factor candidates consider before accepting a job.  

Offering a competitive salary is crucial to obtaining new employees for your company. While negotiating employee compensation with a candidate, it’s possible to acquire insight into an individual’s expectations regarding pay.  

Individuals that are currently employed at your organization may also renegotiate their salary once they’ve gained enough experience at your company. Overall, your salary negotiation strategies will strengthen the relationship you have with your team.  

Tactics to Utilize When Negotiating Salary  

Before you dive into a salary negotiation with any candidate, it’s best to prepare the strategies you plan on using in order to come to a mutually beneficial agreement. The following are a series of helpful tips that will successfully guide your salary and compensation negotiations.

1. Set a Range

Be sure to understand just how much your company can afford to spend on a brand-new hire. Start by assessing your company’s budget. Consider the factors that could most likely influence your offer depending on the candidate in front of you.  

Take into account their attitude, skillset, experience, and industry connections. These are all things that could make a candidate a valuable asset to your company and its existing employees.  

Set an upper and a lower limit that works best for the position in question. The upper salary limits functions to ensure that you can afford all labor expenses. On the other hand, the lower limit ensures that the employees receive a reasonable compensation.

With this in mind, the employee is less likely to seek out a position that offers a better salary for their workload.  

2. Get Familiar with Industry Standards

To find the most productive way to negotiate salary with your employees, you’ll need to conduct some research on the jobs in your industry at different experience levels.  

Candidates with more experience may expect a higher salary than individuals who are in the beginning stages of their career. Research and analyze your toughest competitors who supply comparable services.  

During your research, browse job postings with their salary listed to see how your business compares. Remember to research benefits, bonuses, and travel stipends.  

3. Understand Candidate’s Expectations  

Many employers make it a point to ask candidates what kind of salary they’re looking for. That way, they know their expectations. If their answer is higher than your company is ready to pay, keep in mind that most candidates are willing to negotiate their salary.  

Individuals who are comfortable asking for a fair salary exhibit self-awareness, initiative, and stellar confidence.  

4. Begin the Negotiations

The negotiation process should start off simple. Begin by offering the candidate a specific salary amount. This permits candidates to adjust their expectations regarding compensation while also giving them an idea of a salary range that’s reasonable.  

Also referred to as “anchoring”, you can influence an individual’s expectations by giving the initial offer. In fact, this shows the candidate that you value the position, ultimately impacting how they view the job offer.  

5. Discover Why Candidates Turn Down Job Offers

Of course, you want your salary negotiations to be successful. To do so, you’ll need to find a compromise that makes you and your new employee happy. On occasion, a job candidate may turn down your salary offer.

If this happens, attempt to follow up with that candidate to find out why they declined your offer. While you may not be able to negotiate with them successfully, finding out exactly what they didn’t like about your offer will surely help you with future salary negotiations.


6. Be Direct and Concise  

When you’ve reached your limits in a negotiation, be very clear with the candidate that you’re unable to offer any more compensation than what was discussed.  

Transparency in conversations about pay exhibits respect, preventing you from wasting any valuable time. If you both find yourselves failing to come to an agreement that remains within your budget, set a limit.

Clarify the value of your company and specify the benefits it provides employees. This is likely to attract candidates.  

Seal the Deal

Once you and the candidate have agreed on a salary, a start date, and benefits, have the candidate sign an offer letter confirming that they agree to the terms set in place.  

In most cases, the candidate will likely need to give notice to their current job, meaning there will be around two to three weeks between acceptance and their start date. The company they currently work for could potentially make a counteroffer.

In case this happens, stay in communication with your new hire.  

FRIDAY Helps Small Business Manage and Pay Their Team  

When it comes to managing, tracking, and paying your employees, additional help goes a long way. FRIDAY is the simplest software created to help small businesses manage, track, and pay their team without any paperwork involved.  

FRIDAY is an easy to use, yet powerful payroll and team management solution.


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