Factors that Influence your Compensation.

Salary Negotiation: Factors that Influence Your Salary

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Salary Negotiation: Factors that Influence Your Salary

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Factors that Influence your Compensation.

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Salary Negotiation: Factors that Influence Your Salary

Over the last one decade or so I have negotiated Compensation with several thousand of candidates and have found that on many occasions candidates give emotional reasoning rather than actual, logical and practical. Last week we negotiated Compensation with one of the candidates and although he felt comfortable with the amount that was offered to him but later on he refused to join and said that his parents feel that he should have gotten higher salary. That was absurd. There was another candidate who demanded double the amount of her current Compensation and the reason she gave was that she is getting married and then planning to go family way, which in turn will increase her responsibility towards her family and therefore she should be given higher salary. I believe that many candidates have no idea about factors that actually influence the offered compensation. Salaries are not decided on the basis of your personal commitments or responsibilities but rather on the basis of skills, talent and experience that you bring to the table. In this write-up, we are making an attempt to discuss all the factors that influence the Compensation.

Following factors influence the Salary

1) Compensation budget based on job evaluation and Industry Standards – Companies decide their Compensation budgets based on the requirement of a particular skill, demand and supply of that skill, required expertise level, industry standards, and a need to address internal and external inequities. Therefore, for example, a Software Engineer is likely to get better Compensation offers in Information Technology Industry than in any other Industry and a Graphic Designer in Media or Entertainment Industry is likely to get higher Compensation than his counterpart in any other industry. Among those interviews that I took in the last SIX months or so, many candidates were not aware of any such facts or practices.

2) Performance in interview – So, you have the talent, required skills, experience and expertise but how will the companies or those interviewers know this? Of course by your performance in the interview. Your ability to communicate and demonstrate your experience, expertise and skills. If you fail to do so and the worse if the content of your resume fails to match the content of your interview discussion, then forget about negotiating a good Compensation package for yourself, you won’t even get a job offer. Also, your conduct and attitude during the interview also plays an important role. Any act of arrogance could be fatal and suicidal.

3) Relevant domain expertise and experience – As the corporate world is moving forward to saturation and there are lesser break-through innovations and companies are rather concentrating on optimization, consolidation and creativity, therefore they emphasize more on any particular skill within a domain rather than the domain itself. For example, Human Resources Management is a very vast and broad domain and if you just say that you have 7+ years of experience in HR, doesn’t imply anything. Same goes for domains, such as Finance Management, Business Development and Marketing and many others. And then there are hundreds of software languages and their frequently updated versions. Also, having worked for certain number of years at certain level does not qualify someone de facto for a senior role if the person is not having required qualities for that position and role. For example, having worked for FIVE or more years as an Executive does not qualify someone for the role of a Manager.

4) Relevant industry experience – Having expertise in a required skill of a domain is not sufficient, one must also have relevant industry experience and this is done to broadly gauge the fitment of a candidate to accept and adapt to the company culture. Although, the specific culture of an individual company within an industry also varies by certain degrees but the broad challenges and requirements of a culture within a country or within a measurable geographical distances remain same. For example, Content Writer for a Gaming Industry would require different skill sets than a Content Writer in a, say, Business Process Outsourcing or Information Technology Industry. Business Analyst in a Research Company would be different from a Business Analyst in an Entertainment Industry.

5) Last drawn Salary – Just like the way a candidate will not join a new company at compensation lesser than his last drawn salary; a company will also not appoint a candidate with a fairly low compensation when the company budget for that role is exponentially high. A normal practice is to offer a 10-30% hike on the last drawn salary, if only you qualify in other selection parameters and perform exceptionally well in the interview. Also, if your last drawn salary is fairly low and in spite of offering you a suitable hike, if it is felt that hiring you may imbalance the internal inequity of the company, you will have a very remote chance of being hired.

6) Local Talent Versus Relocation – If the company is willing to hire an outstation candidate or if the preference will be given to a local talent also affects the Compensation budget. To hire people with common skills (easily available) and to fill positions at entry or middle level, the preference is given to local candidates. However, for senior level positions and to hire candidates with uncommon skills and for those decision making roles that could directly influence the growth of the company, companies are willing to go the extra mile. At that point of time the preference is given to hire the right kind of person to fit the role and not to compromise in any way. For such candidates, compensation and benefits or relocation expenses are never going to be any constraint. Hiring an outstation candidate is 3-5 times as costly as hiring from a local talent pool.

7) Potential and attitude of candidate – It is important to have the required skills and experience to demand appropriate amount of compensation and benefits but more than that, it is important to have the right kind of attitude. An expert in his skill and domain but carrying a wrong attitude is more harmful than a mediocre performer with a right attitude. One could be trained and coached for skills and performance but an attitude is inbuilt. Your mannerism, willingness and ability to learn, your confidence, ability to work in a team, being self-disciplined and self motivated, potential to grow, willingness to accept and face challenges, ability to see the bigger picture and willingness to grow with a company rather than considering the given opportunity and role as a stepping-stone to higher position and package elsewhere are some of the traits that an interviewer and company looks in you. You must have read somewhere that “Compensation is not a constraint for a right kind of candidate”, this is the definition of “right kind of candidate; a candidate with right kind of skills, experience and ATTITUDE. Candidates with required skills, experience, expertise and right attitude are given higher compensation rates than anybody else.

8 ) Name and brand of institute – Although there is no direct connect but name of an Institute and University also influences the hiring decision and the probable compensation package. Different institutes have different approach towards training, coaching and development and hence candidates from certain institutes are presumed to be better trained and well-prepared than those from many other institutes in those soft-skills that influence the efficiency and productivity of an individual in work conditions.


As we are discussing about various factors that affects the compensation negotiation, I fondly remember one incident of 2004, where one of our employee, (Say, Shelia) working in the BPO unit of our organization approached me to complain about her lesser Compensation as compared to another colleague (Say, Nina) working in the same unit. She said, “Just like that woman, even I too have SEVEN years of experience; I too have worked in USA; I am also a Post Graduate then why is she getting 2.5 Million INR (53,500 USD) Per Annum, whereas I am getting just 275,000 INR (5,800 USD) per annum”. The reason for that difference in Compensation was as follows:

  1. Shelia did her Graduation from Osmania University and her Master’s in Commerce from Andhra University and Nina did her Graduation from Indian Institute of Technology, Mumbai and Post Graduate Diploma from Indian Institute of Management, Bangalore.
  2. Nina worked with companies like GECIS and Bank of America, whereas Shelia had worked with small time and fairly unknown companies.
  3. Last drawn Compensation of Nina was 1.7 Million INR (36,500 USD) Per Annum, whereas the last drawn Compensation of Shelia was 225,000 INR (4,850 USD) Per Annum.

Candidates looking for jobs with higher salaries need to improvise their attitude and skills. They should not get sentimental or emotional and behave arrogantly. Companies will never be responsible for your personal or family commitments or duties and you will never be paid for it. No one does any kind of charity without any direct or indirect implied benefit or gain. This write-up is an attempt to touch and discuss some of the crucial yet primary factors that affects decisions related to compensation and benefits. There are several other factors, which are outside the scope of this article. Candidates must be aware of it before they begin to act ignorantly.

Your feedback and comments are very valuable to us. Feel free to write to us to share your thoughts and views.

Composed by: Sanjeev Himachali
Article Source: http://www.sanjeevhimachali.com/?p=370

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