Negotiating Starting Pay and Benefits

What if you make a job offer, and the person is interested but wants more money than you're offering? When this situation arises, first find out exactly how much the candidate wants. It may turn out that your offer isn't too far from what's wanted, and you may decide that the increased amount isn't a problem.

What if your offer is substantially lower than what the applicant wants? There are different approaches to take, depending on what you want to do.

If you can't pay what's asked. If the requested pay is out of the question, but you want to try to hire the person, make a counter-offer. Perhaps you can be flexible with respect to issues other than money, such as working conditions or benefits.
- Consider reducing the number of hours or amount of work to be performed.
- Offer rapid salary increases, subject to scheduled performance appraisals (perhaps in the context of a probationary period, with a review scheduled after three or six months).
- Offer additional benefits instead of higher pay (note that it might not be legal to offer certain benefits to some employees but not others).
- If appropriate, offer contingent compensation, in the form of stock options, commissions, profit sharing, or bonuses, based on achieving specified goals.

If this isn't acceptable, explain that you have to keep to your budget and call the next prospect on your list.

If you're uncertain. If you would consider paying the candidate more, but you're on the fence about it, these questions can help you decide if the person is worth the extra money:

Special skills. Is the candidate highly skilled (more so than other applicants) at performing tasks critical to your business?
Employment status. Employed people are less willing than the unemployed to take a job for less than they want. If you really want this person, you may have to pay. Assess your bargaining position on this basis.
Future growth. If you see the position growing from its present duties into something that will require additional skill and responsibility, you may be getting a deal by agreeing to pay more. Once the applicant takes on the additional responsibilities, you'll be getting your money’s worth.
Alternative candidates. If there were other strong candidates in your applicant pool, you have more room to bargain. Another applicant may take the job for what you're offering.
Employee longevity. While there’s no sure way to predict, if you sense that an applicant will be a long-term asset, paying a little more up front may be the best thing to do.
Urgency. How long can you let the position remain unfilled?
Impact on existing employees. If you hire a new employee for the same pay as an experienced employee performing similar work, the senior employee will likely feel that his or her years of service and additional experience aren't being recognized. Employees frequently talk about pay among themselves, and it’s illegal to forbid them from discussing how much they make.

Once you've answered the relevant questions, you should be in a better position to decide what to do. Remember, whenever you negotiate anything, that the person who’s willing to walk away from the deal has the stronger bargaining position.