Offering and negotiating employment terms with potential new employee is a time fraught with risk.
The phrase “It’s not over until the fat lady sings” couldn’t be truer of the hiring process. Just because you think you have identified the perfect candidate, it doesn’t necessarily mean that the candidate thinks they have found the perfect job.
Ideally it should be about creating a win/win situation for the employer as well as the candidate. However this is not always the case.
By the time you get the stage where you are ready to put together an employment contract, you should have no doubt at all in your mind that the candidate will not sign on the dotted line.
When you are ready to go ahead with an offer, it’s always a good idea to make a verbal offer first. Call the candidate, sound excited for them, let them know how keen you are to have them come on board. Talk through the role and core responsibilities again before confirming the salary you would like to offer them and of course when you’d like them to start.
However, when all is said and done, money talks. So make sure you’ve got all your ducks lined up when it comes to the total remuneration package. If the candidate asks about incentives, bonuses, perks, inclusions, commissions etc, you want to have your facts straight.
1. Base salaries
With the war for talent as fierce as it is, the best candidates today are definitely not only looking for an increase in their base salaries.
I remember once making an offer to a candidate which included a $10,000 increase on her current base salary. Without even thinking about it, she said, “by the time that gets taxed, and they pay me monthly, it will hardly be enough to cover the fuel it will cost me to get there“. Upon reflection that probably wasn’t too far from the truth.
From the perspective of an employer making an offer to a potential new employee, if the candidate is going to accept a job offer based purely on a higher base salary, then their existing employer is very likely going to put forward a counter offer. Then the bidding war begins and this is something you really should try to avoid.
2. Compensation plans
Having a candidate decline a job offer because he or she believes that (base salary aside) the total compensation plan you are offering them is not attractive enough is also a situation in which many employers are finding themselves in today’s market.
Business owners and hiring managers must put a far greater effort into formulating compensation plans that will not only ensure that the candidate realises just how serious you are about wanting them on board, but will also reinforce to the employment market that you are clearly positioning your business as a true employer of choice.
Employers should find out during the initial interview what would drive the candidate to really perform well? How would they measure their own success in the role you are talking to them about? What motivates them beyond their base salary?
Once this information is ascertained it is then possible to tailor the compensation plan around the candidate.
3. Incentives and bonus schemes
Many candidates are put off by terms such as ‘discretionary bonus‘ or ‘profit sharing’ when salary packages are broken down or outlined in their offer letters, since for the most part the chance or likelihood of achieving these additional benefits is beyond their control. Personally they may perform outstandingly, but if the company doesn’t perform well, then a ‘discretionary bonus’ could be minimal and in some cases not awarded at all.
Candidates today would much rather be measured (and ultimately rewarded and compensated) on their own individual performance and contribution to their team as well as to the business as a whole.
Nowadays the majority of candidates (at least those really serious about finding the right next step in their career) will be totally prepared when it comes to assessing and ultimately negotiating their salary, benefits and total remuneration package.
They will have conducted their own comparative research into salary packages, and they will have a fairly accurate idea of their value for their level and profession in their market.
4. Tailoring the remuneration package
Where possible, you should tailor earning potential around an individual employee.
More than ever before candidates are not simply jumping at the first offer made available to them. So asking “what package are you on now, and what package will entice you to move?” is a question that should be asked when you first meet with a prospective new employee. That way you can start to think creatively in terms of meeting their expectations around earning potential.
Discussions around job offers, salary packages, compensation and benefit plans are a daily occurrence in today’s market. However attractive compensation plans, attractive incentive schemes and offers tailored towards both the financial as well as developmental needs of highly sought-after candidates are extremely rare.
Don’t forget your priority is to get your superstar candidate to sign on the dotted line without delay. You don’t want your offer to be part of a benchmarking exercise or a fishing expedition for a pay rise with their current employer. So please don’t let the inclusion of a cell phone plan or a percentage point in a commission structure become the deal breaker.