Hiring Strategy: How to Play the Negotiation Game

If your best candidate counters your wage offer, do you negotiate or keep interviewing?

If your business is booming and you need to add staff, or you’ve had an employee resign, you face the challenge of attracting someone who will be a good fit for your company. They also need to be a good fit for your payroll budget. So what do you do if you find the perfect candidate who could step right into the position, but they won’t accept the job at the salary you are offering? Do you negotiate? Or just move on to No. 2 on the list of applicants?

Why is this happening?
When the U.S. unemployment rate topped 10 percent in 2009, most applicants were thrilled to get any job and accepted the wages offered. Today the unemployment rate is considerably lower, and while lower unemployment may be good news for the overall economy, it could mean your job offer isn’t the only one on the table for an applicant and he or she may want to negotiate.

Do your homework
Before you even advertise that you have an opening, evaluate what you are paying current employees to help determine how much you are prepared to offer the new person. 

Don’t mislead a qualified applicant into thinking the job’s salary is significantly higher than it really is in hopes that once they meet you, see your operation and learn about your company they will jump at whatever you offer. Sure you’ve got a wonderful company, but their initial infatuation will quickly change to resentment if they aren’t offered what they think they are worth.

Two websites can help you determine the going rate for the job you are offering. The Bureau of Labor Statistics provides national hourly and salary wage estimates for about 800 occupations based on surveys it conducts. You can even narrow down the information by geography. Similarly, the “Salary Wizard” at Salary.com has a searchable database of salaries by job title and location.

This information is easy to access, so obviously job applicants can look it up too and will know if you are low-balling them. Even if they don’t know when they take the job, it probably won’t take them long to figure out if you pay significantly less than the going rate in your area. While it may save you some money initially, if the job market continues to be strong, you could very well lose the new employee and maybe some old ones to the competition in the next couple years if you pay significantly less than the going rate.

Once you’ve determined where the going rate intersects with what your company can afford, you’ve got two choices: either decide that your first offer will be your final offer, or come up with an offer that has some wiggle room in case the candidate wants to negotiate. Once you know what the going pay rate is for the job you are advertising and factor in how high you can actually afford to go, you can devise an initial offer. If you did your homework, your starting point for negotiations shouldn’t be too far from where both you and the employee would be happy.

If you are willing to negotiate, know your absolute top limit and be prepared to let the prospect walk away.

How important is this job?
When determining a wage offer for a particular candidate, ask yourself these questions:

• Are other, equally qualified candidates available if this applicant says no? If the answer is yes, you have the upper hand.

• Has the job been difficult to fill? Are market conditions making finding and recruiting suitable candidates challenging? If yes, the job applicant has leverage.

If you’ve invested time and money in this candidate, you may want to increase your offer. On the other hand, if he or she has been unemployed for a long time, there’s a good chance the applicant will accept an initial offer. Someone with a lot of experience or particularly valuable training and skills may demand higher pay than someone just starting out.

Also keep in mind that if the candidate would have to relocate for the job or commute a long distance every day it could increase the salary required to lure them to your company.

How to negotiate
If you’ve made your final wage offer, there are ways to further encourage a potential employee to sign on. Take a cue from the sports world and offer a signing bonus. This is an up-front one-time cash payment given to an employee at the start of employment, independent of salary. To the employee, it might help defray the costs of taking a new job. For the employer, it shows the seriousness of the job offer without altering the company’s salary structure.

Flexible scheduling is another incentive that doesn’t affect salary. It won’t cost you anything, but it tells a potential employee you value them as a person and understand if they need to work around a spouse’s schedule, kids’ activities, an aging parent’s medical appointments or other special circumstances that could cause them to hesitate about taking the job.

Don’t make promises you can’t keep, however, or you’ll create resentment. For example, don’t dangle a possible year-end bonus in front of an applicant in order to get them to agree to a lower wage if you’ve got no intention of following through on a bonus. Don’t suggest that a starting wage is only temporary until the candidate proves his or her worth if you have no intention of actually giving them a raise after a probationary period.

Beware the bidding war
Maybe the perfect candidate walked through the door after a sad parade of grossly unqualified job seekers, and you know he would be an asset to your company. You make an offer and it’s rejected. You strongly suspect he’s negotiating with the competition, so you up your offer again and again and again because your competitiveness kicked in and you want to win. Stop yourself before you make an offer so out of line with existing pay levels for comparable positions at your company that it causes turmoil.

A certain degree of pay equity among co-workers doing the same job creates an environment of teamwork and fairness. If you get carried away in negotiations and offer a candidate wages significantly higher than the company’s existing pay scale, you risk hurting staff morale if other employees find out. While you’d like to think employees are discreet, this type of information can leak out.

If a job candidate’s demands are significantly higher than what you are currently paying, either those demands or your current pay structure is out of line. Accept that the candidate may reject the job offer or face the fact that you need to bring everyone else up to scale.

If you do choose to negotiate with a potential employee and end up paying more than you initially offered, don’t resent the employee down the road for costing more. It was ultimately your decision. The fact that your new employee was a well-prepared and confident negotiator means he or she will be a well-prepared and confident employee. That’s just the kind of person you want on your team.

Yes, negotiating can be stressful for both parties. The only way to start this new employer/employee relationship off on the right foot is for both of you to be satisfied when you seal the deal.



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