Shaking hands after a job salary negotiation

Salary negotiations are a two-way street; the candidate and employer each come to the table with their own compensation expectations, and must come to a mutually beneficial agreement. As an employer, you need to offer a salary that’s commensurate with the candidate’s skills and experience and is competitive in the industry. You have your own bottom line to worry about, but lowballing an offer can turn the candidate off – especially if they’re fielding multiple job offers.

For many employers, it’s understandably difficult to get salary negotiations right.

Let’s take a closer look at how to best approach salary negotiations so you’re attracting the candidates you need—and retaining them after they’re hired—while staying in line with industry standards to benefit your bottom line.

What Does the Salary Offer Landscape Look Like Right Now?

There are plenty of names for the current hiring environment—The Great Resignation, The Great Re-Evaluation, the Sansdemic—but no matter what you call it, it’s safe to say that it’s a candidate-driven market. Employees have the leverage right now, and employers are doing all they can to attract and retain top talent. One of the most compelling methods involves wooing employees with higher wages or sign-on bonuses.

According to a survey by Normandin Beaudry, more than one in 10 organizations are planning to increase salary budgets above 5%, and some more than 20%. Average salary increases granted in 2022 reached 3.8%, exceeding prior projections. A big factor driving this boost, aside from a difficult labour market, is inflation. Inflation peaked in Canada at 8.1% in June, according to the Bank of Canada, and although that rate has been declining, it’s still much higher than the 2% target. As employees need higher salaries to combat higher consumer prices, employers are responding the only way they can—raising pay rates to match.

We know what you’re thinking. Your organization can’t afford to pay every new hire 5% more than you normally would, let alone 20% more. Even if you could, it raises the question of wage parity. It could widen the gap between what new employees and existing employees make, furthering the risk of tension should employees be transparent with each other about salary. According to a survey by Eckler Ltd., the average salary increase across Canada is expected to be 4.2% higher in 2023. This would be the biggest increase in 20 years.

So, how does your organization go about negotiating salaries the right way?

How To Approach Salary Negotiations

When you’re interviewing potential new hires, make sure your hiring managers are prepared for the discussion about salary. They should be comfortable negotiating and have clear guidelines on what they’re able to offer at the negotiation table. But how do you keep candidates happy without alienating your existing staff or overspending on payroll?

Here are five salary negotiation tips:

1. Don’t Lowball Candidates

Don’t lowball salary offers, even if you feel like you can get away with it. It’s just not worth it. Do your research and meet the salary expectations of the market. Know that some candidates may be willing to accept lower pay, particularly if they’re underqualified, currently unemployed or desperate to leave their current job. But if you undercut them on compensation, even if they accept it, they’re more likely to leave for greener pastures at the first opportunity.

“It’s going to affect that level of trust,” says Danielle Bragge, one of our co-founders, when speaking with HRReporter. “The candidate might feel deceived. If an organization has a good candidate in hand, all you’re going to do when you lowball that offer is lose the candidate and start the search all over again. So they should consider the time, the effort, the resources that they, their team, and the recruitment firm have put into that particular search.”

2. Approach Salary Negotiations Collaboratively

One of the biggest mistakes employers make is approaching salary negotiations with an “us versus them” mindset. You and your employees shouldn’t be at odds—and the relationship shouldn’t start out with that as the foundation. Think of salary negotiations as a win-win; both parties should come to an agreement that works for everyone. It does not have to involve the employee settling for a certain salary, or you as the employer “giving in” to certain demands. When you collaborate, you’ll come to an agreement that satisfies everyone.

How do you negotiate collaboratively? First, have a salary range in mind so you’re not anchored to a strict number. Give yourself some wiggle room to negotiate if a candidate expects more than the initial offer. Secondly, take some time to think about what is driving your company’s compensation policy. Is it seniority-based? How much does equity and fairness factor in? Third, ask targeted and strategic questions to the candidate so you have a better understanding of where they’re coming from in their demands. Knowing the answers to these questions ahead of salary negotiations means you have the essential information in-hand when you need it.

3. Salary is Not the Only Part of the Offer

Another way to negotiate collaboratively to find a compensation solution that works for everyone? Remember that you have more to work with than just salary—money is only part of the offer.

Consider the other things that factor into total compensation. Think about the various benefits and value adds you can offer candidates to entice them to accept the offer. You can adjust your offer based on these and potentially use them to find a compensation arrangement that everyone is happy with:

  • Equity/profit sharing
  • Paid time off
  • Health and wellness benefits
  • Retirement plans
  • Flexible work arrangements
  • Savings plans
  • Commission
  • Signing bonuses
  • Holiday bonuses
  • Performance bonuses
  • Longevity bonuses
  • Vehicle or phone allowance
  • Childcare benefits
  • Meal stipend

Many candidates will agree to a salary that is more in line with your expectations if they know they’ll be receiving full health coverage or paid time off, for example. It’s a powerful bargaining tool that benefits both you and the candidate.

4. Need a Different Approach

Make sure you know whether the candidate you’re negotiating with applied for the job or was headhunted and adapt your approach accordingly. When you’re negotiating with a headhunted candidate, remember that you reached out to them.

You will likely need to be transparent about the salary range and benefits earlier in the process, and be prepared to discuss company culture, work environment and work-life balance. Expect that the candidate may need more than a compelling salary to leave their current job, and be ready to ‘sell’ what your company has to offer.

Come to the table with your best offer for the headhunted candidate. They’re very likely going to receive a counteroffer from their current employer, and you may need to counter the counteroffer if you really want to bring that candidate on board.

5. Leverage Your Recruiter’s Expertise

A final tip when it comes to negotiating salary: Trust and utilize the expertise of your recruiter, if you’re working with one. These individuals make it their business to know the current employment market— they know what the average salaries are for the positions you’re trying to fill. And they have relationships with the talent they represent, so they know what certain candidates may be willing to accept or compromise on during salary negotiations.

To put it simply, working with a recruiter means you’re getting an expert in the current market with access to the top talent you need. That makes it simple and easy to find the right people— and agree on a salary that works for everyone involved.

Get Help With Hiring From The Headhunters

We are a Canadian recruiting firm serving employers across North America. If you’re looking for a partner to help you find great people—and help with salary and compensation negotiations—you’ve come to the right place.

Contact our employment agency in Canada to learn more about what we offer and how we can help your organization succeed.