HR wants the best possible value on salaries or wages, while being fair and competitive. And for employees, a bigger pay packet can mean a significant lifestyle upgrade.
As an employer, you hold most of the cards. Ultimately, you make the decision on how much you’ll pay in salary or wages.
But at the same time, if you value and respect the contribution your employees make, it’s worth listening to their salary needs. Being open to discussion and negotiation on salary — while being firm on what you can and can’t offer — can also help you compete for top talent.
Pay structure can influence salary discussions
Graded pay structures are in place at around half of UK organisations, mostly in the public sector (CIPD 2014). If yours is one of them, you might have little room for discussion on salary and wages. However, it’s still a good idea to listen to employees’ requests and explain your company’s position on pay.
If your organisation uses individual salaries, you’ll probably have greater room for negotiation.
Know your position
Before you can have a useful discussion about salary and wages, you need to consider two things. Firstly, you need to know what you can afford to pay. And secondly, you need to know what the market rate is for the position, within your own sector and region.
So benchmark salaries and assess your financial status first. Don’t start a salary discussion, and especially not a negotiation, without being informed.
Discussing salary during recruitment
HR and company managers are perhaps most likely to discuss salary and wages when interviewing new applicants, or when making a job offer.
Here are some key questions to ask.
“What do you make at the moment?”
Unless you’ve already advertised the salary for the position, knowing the applicant’s latest wage can allow you to re-think your strategy. If you were planning to offer £55k, but the applicant previously earned £40k in a similar job, they might be happy with a lower offer.
This question also tells you more about the applicant and the pay level they find acceptable.
“Would you be happy with a salary of X?”
When bringing up an actual salary figure, there are two ways you can go. You could make the first offer, based on your ability to pay and your knowledge of the market. If you’re open to negotiation, you’ll want to leave a bit of headroom with your first offer.
By making the first offer, you put the onus on the applicant to simply accept, or make a case for why they deserve more. However, you also risk offering a higher amount than you really needed to.
“What salary are you looking for?”
Your other option is to ask the applicant to name the amount they’re looking for. Assuming they know how to negotiate, the amount they give will be the maximum they hope to get — which means you have room to haggle them down.
If you’re lucky, the amount they name could be less than what you were planning to offer.
Discussing pay rises
When an employee approaches HR or their manager about an unscheduled pay rise, it’s entirely up to them to convince you why.
Assuming the employee is already under contract, you have no obligation to increase their salary — but there are several reasons why you might, and why you should listen to what they have to say:
- If the employee is particularly talented, discussing their salary is a better option than seeing them leave.
- Asking for a pay rise takes guts, and there may be difficult personal circumstances behind it.
Hear your employees out on salary, but never step too far outside market rates or your ability to pay.