Thursday, October 20, 2011

Salary Negotiations: An HR View

As employees, we become nervous and concerned when entering salary negotiations but, as with all negotiations, it is good to know where the HR person is coming from. It always helps if you're both speaking the same language.

First of all, it’s not every company that tries to make their personnel derisory offers. All HR personnel want motivated and balanced teams, therefore individual satisfaction with your salary offer is important to them and is a big motivator for the coming year.

In one instance we have had HR personnel speaking about 'percentiles.' This is a very common way of talking about company finances and investments but employees may be less aware of it's significance in salary negotiations. The key factor is to ascertain that you are both on the same page and when it comes to stats, that may be awkward.

Your View of Salary Band

If, during the negotiation you are told they you are currently below the 50th percentile and you will be advanced closer to the 75th percentile, would you be pleased to accept this?

From your side, you will have in your mind a graph similar to the one above, making the 'logical' assumption that the salary band is divided from 0% to 100%. But that may not be the case in the HR stats world you are facing.

Your HR representative is looking at a different picture entirely.

We have had enquiries where HR personnel talk about percentiles but that is not normally the term used. HR would normally use the term “compa-ratio” and describe it around a midpoint on a salary curve. That midpoint is label as 100%. It’s the exact same graphical shape, except it is statistically 'labelled' differently. See below:

HR View of Salary Band

So, when a 'deceptive' HR person says you are getting paid at 75%, she wants you to think in terms of the first graph, believing you are getting more money than 75% of the people who do similar jobs.

This sounds OK, doesn’t it? The reality is, a compa-ratio of 75% means you’re getting paid less than the average person in the job. Not so good.

Salary compensation isn’t an exact science. A lot of it is pure guess work and gut feeling. Some companies do arrange salary surveys, but commonly, no two jobs are identical, even across organisations.

When, determining what salary band to slot a particular job into, a lot depends on what the manager is willing to pay for the positions and what's left in his budget. Unfortunately, Job Descriptions are often written or re-written, to fit a certain salary, not the other way around.

Additionally, most companies don’t allow your salary to be much more than 105% of midpoint anyway. You are never going to get 125% of “midpoint,” set your mind to it, that's just not happening.

Your potential for raises are also determined by your percentile. If you’re at 75% and have a fantastic performance rating, you probably believe you can expect a big raise. However, if you’re at 100% and have an even better performance rating, you may end up with a tiny raise. All this is because of that little bell curve and it's intransigent labels.

On principle, HR don’t want you going over 100%, so you won’t get a big raise no matter how fabulous you are. You have come to the point whereby to get a good raise, you have to get promoted into a different salary band, which is a whole different ballgame.

So, in reality, 75% is not a great place to be but in that position you’re nearing the top of what can be expected in that job, and you still have room for an increase in salary.

As a rule if you are given an updated salary offer, ask, “What is my compa-ratio?” and if they say, “You’re at 100%!” ask, “Is it possible for this job to be upgraded?” Because while you may be happy with the salary, you also know that come next year, you're getting no rise.

So, whilst you have the HR person's attention, ask about re-grading the job. They may roll their eyes and say no or they may say they will consider it but from your side, request a note be made in your file that you are reaching the ceiling and would like to advance your position. Worst case, you will sound ambitious.

NB: Negotiating salary is all about proposal and rejections: trying and taking risks. Sometimes offers are firm on salary. Sometimes they are not.

Sometimes companies will move more on benefits and other factors. Things like vacation, commuting and work schedules, which may be more important to you than a few dollars more.

Hopefully you can now enter the salary negotiations arena a little better armed. Good luck!

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