Have you ever gone to a job interview thinking you a worth a certain salary only to be surprised by the offer made to you? A lot of people have, but it is important to note that salary is never something that employers just dream up. There are several factors that employers take into consideration when negotiating salary.

Most companies are looking to hire the best talent possible and to pay them fairly. Employers are not looking to pay more than the job is worth to them because at the end of the day, a salary is both a business expense and an investment which should have a return. Employers always look at the value the employee or potential employee will bring to the company.

When ascertaining the job worth in the company, it may be discovered that the job is not worth the money they are paying. However, several factors are taken into consideration before an employer makes you an offer or agrees to your salary terms. Below are the factors that influence the salary decision making process:

Job type: For salespeople or business development employees, it is easy to see the value they bring to the company as their jobs are directly tied to revenue generation and several other measurable metrics. Employers can simply ask themselves if the sales they are generating covers their overall costs to the company. It is a stricter process for technical, administration and support staff as their value is not so much in the money they make for the company but in the value they bring in and the money they save. In such instances, employers ask themselves what it would cost NOT to have them on board and they use that to justify their salary.

Experience/ Productivity: Experience and previous success in a role affects how much you will be worth to the company. Employers want to invest in people they know are capable to produce results and improve the bottom line, this reduces risks for them. Although there are exceptions, candidates with more experience, proven productivity and a very attractive work history can leverage better salary than those with less experience and no proven history result of result driven productivity.

Qualification/Education: The match between your education and what's normally required for your job usually affects your pay. The quality of education can also affect salary. Earning a degree from a top program typically has a positive influence on pay, while earning a degree from a school that's considered weak in a field may decrease your earning potential.

Previous salary: There is a reason some employers ask to know what your previous salary was, in some cases they may even ask for a past pay slip. This is because the employer is trying to ascertain whether they can afford to hire you and if they can also afford to give you a better offer than your previous employer.

Company Policy: It is highly likely that the company has a remuneration and benefits policy regarding standard salary for each job grade or level of management. Of course, they may be willing to bend a little if they find a highly competent and attractive candidate or they are trying to keep such an employee from leaving but basically, companies tend to look at their remuneration and benefits policy before making you an offer.

Company size/ budget: It goes without saying that company size and budget also play a big role in influencing employer decisions on salary offers. Larger companies that bring in more revenue tend to be more accommodating to requests for higher pay but they too try to be careful to not overpay employees, they also take into consideration the value the employee brings to the company and the current/ approved operation budget. In the same light, there are some SMEs that pay even better than larger companies due to their size and flexible operating budgets.

Minimum wage: This serves as a mark for employers to know what offer is below the legal requirement. Generally, employees who earn minimum wage tend to be less satisfied and productive than those who earn above it. Most employers may try to offer more than minimum wage when they really want the talent and this likely causes lower employee turnover.

Probation period: The probation period allows employers to gauge whether you are a worthwhile investment to the company. After a successful probation period, most employees are offered a raise as confirmation of employment.

Negotiating pay can be difficult when you take a new job at an organization, and it may continue to be a challenge throughout the employee lifecycle if one is unprepared on the salary negotiation process or is not knowledgeable on the factors influence your employer’s salary decision.


Author: Chechiwa Nyangu for TopFloor Limited. TopFloor is a human capital solutions provider that specialises in human capital outsourcing, human capital development, human capital acquisition and human capital consultancy.

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