How and Why Did the Company Come to That Salary Offer?
By Jeff Altman, The Big Game Hunter
Salary negotiations can be stressful for job seekers. When you receive an offer, you naturally want to understand how and why the company came up with that particular number. Asking the right questions can provide valuable context and information to help you respond.
What Factors Do Companies Consider?
Several elements come into play when determining salary offers:
Market Rate – Companies review competitive salary data to see what similar roles at other organizations pay. This provides a baseline for calibrating their own ranges. Resources like PayScale, Salary.com, and trade associations give benchmarking information.
Internal Alignment – Salaries for the same or comparable positions within the organization are analyzed to ensure consistency. Large discrepancies between employees with similar experience and duties can lead to retention issues.
Budget – Each department is allocated a certain budget for compensation. Offers must align with what is fiscally possible and approved by leadership. Budgets are usually set annually.
Candidate Background – Your specific skills, qualifications, experience and education factor into the offer. Roles requiring highly specialized expertise often command higher salaries.
Value to the Organization – The more critical the role is to achieving business goals, the more companies may invest in salary to attract and retain top performers.
Growth Potential – If the position offers clear advancement opportunities within the company, the base offer may start on the lower end.
Location – Salaries adjust based on geographical location and cost of living. The same role pays differently in New York vs. Boise.
Negotiation Range – Many companies budget 3-5% above the initial offer, knowing candidates will counter. They leave room for negotiation.
How Should You Ask About the Salary Offer?
When the offer comes in, resist the urge to react right away. Here are some productive ways to discuss the components of the offer:
- “I’m very excited about the opportunity, but want to understand better how you arrived at the proposed salary. Can you walk me through the considerations?”
- “The offer is close to my expectations. For my own understanding, how was this salary determined for this role?”
- “I appreciate the offer. Since cost of living varies so widely between regions, can you share some insight into how location was factored in?”
- “The salary range seems in line with my research on industry standards. Were there any other benchmarks used when creating this offer?”
- “Thank you for the offer. I’d love to hear a little more about how my qualifications specifically contributed to reaching this compensation level.”
Avoid framing the questions in a confrontational tone. You are seeking information, not negotiating (yet). Listen closely to the full explanation without judgment.
Key Follow-Up Questions
Digging deeper with a few targeted follow-up questions can uncover key details:
- Is there flexibility in the starting salary or is this firm?
- What are the performance metrics and timeline for salary reviews and increases?
- How do bonus and equity compensation factor into total rewards?
- What is the salary growth trajectory for top performers in this role?
- Does the company offer benefits like signing bonuses or relocation packages?
The company’s responses allow you to gain clarity about the offer and whether it matches your expectations. With this information in hand, you can determine your next steps in accepting or negotiating the final deal.
Being forthright leads to more productive conversations around an offer. Make sure the company provides the context you need to properly evaluate a salary offer before moving forward.
Ⓒ The Big Game Hunter, Inc., Asheville, NC 2023
Be Prepared to Walk Away from a Job Offer
ABOUT JEFF ALTMAN, THE BIG GAME HUNTER
People hire Jeff Altman, The Big Game Hunter to provide No BS job search coaching and career advice globally because he makes job search and succeeding in your career easier.
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Connect on LinkedIn: https://www.linkedin.com/in/TheBigGameHunter
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He is the host of “No BS Job Search Advice Radio,” the #1 podcast in iTunes for job search with over 2900 episodes over 13+ years.
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