Two men sit side-by-side at a wooden table. The man on the left is wearing a button-up shirt and glasses; he holds a tablet and gestures with a pen as he speaks. The man on the right is wearing a button-up shirt and blazer; he looks at the tablet and has his hands on the table.
Pay negotiations don't have to be tense or awkward if you go in with a plan, some research and an open mind. — Getty Images/fizkes

Salary negotiations are an essential part of the onboarding process, and if you do it right, everyone should feel like they won. Your employee walks away feeling satisfied with their pay and benefits, and you can feel good about staying within your budget constraints. Here are strategies that will help you effectively negotiate salary with employees.

Do your research

Before walking into a salary negotiation, it’s important to do your research. Knowing the industry standard for that position will make it easier for you to stay within your budget while still making a competitive offer.

Do some research on what the average pay range is for employees at different skill levels. You can see what similar companies in your area offer their employees and look at crowdsourced market data.

[Read more: How to Know What to Pay Your Employees]

Know the laws in your state

When you’re walking into a salary negotiation, it’s helpful to know what that person is making at their current job. But you should tread lightly before asking that question.

Increasingly, many states are banning employers from asking questions about salary history. There are currently 21 state and local bans in places like California, Colorado and Missouri.

But the laws do vary from state to state — for instance, California issued a statewide ban that applies to all employers. In comparison, Missouri’s ban only affects Kansas City and employers who work for the city.

Know what job candidates expect

As soon as you begin talking to potential job candidates, it’s a good idea to ask about their salary expectations. If you wait until the offer stage to discuss salary, you may find that their expectations are too far off from what the company can pay.

However, don’t be concerned if the candidate’s initial asking price is higher than you’re willing to pay. Many people will start high, knowing they’ll have to negotiate the price down.

Negotiate on salary where you can, but be transparent once you reach your compensation limits.

Publish a salary range

For certain positions, it may be a good idea to publish a salary range in the job posting. Doing this can save you a lot of time since people who consider the salary range a non-starter won’t apply.

However, you also need to know what factors will put an employee in the higher or lower ranges, and you should be prepared to explain your reasoning during the negotiation process.

Make your initial offer

To start salary negotiations, you’ll begin by offering the job candidate a specific number. You should expect that person to come back to you with a counter-offer.

Negotiate on salary where you can, but be transparent once you reach your compensation limits. From there, you can give that person time to consider your offer and weigh the pros and cons of the job.

Don’t forget about benefits

If you can’t afford to pay as much for this position, you can make the offer more attractive by adding on additional benefits. According to an SHRM survey, 60% of employees agree that benefits are an important contributor to overall job satisfaction.

And there’s no limit to the type of benefits you can offer new employees. Extra paid time off, remote-working options and continuing education benefits are all attractive perks to potential employees.

You might also consider offering new employees a one-time cash-signing bonus. This can be a great way to motivate job candidates who are on the fence.

[Read more: 7 Wellness Benefits You Can Offer Employees]

Find out why job candidates say no

Hopefully, your salary negotiations will be successful and you can find a compromise that you and your new employee are happy with. But occasionally, a job candidate will turn down your offer.

When that happens, you should follow up with that person and find out why they said no. You may not be able to negotiate with that person successfully, but finding out what they disliked about your offer will help you in future salary negotiations.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Follow us on Instagram for more expert tips & business owners’ stories.

To stay on top of all the news impacting your small business, go here for all of our latest small business news and updates.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

man standing looking down at phone
A message from
A 401(k) your employees can manage from a phone?
About time. Give your employees access to a personalized retirement plan and tools to help them save and invest.* And you? You’ll be able to manage your employees’ 401(k)s in one easy-to-use dashboard. Win-win.
*Investing involves risk.
Learn More
Published December 07, 2021