5

I have a fairly good salary for the area, and I am looking for another, more challenging, position. It took no time for me to get phone screened and spend four of what should have been one hour of intense interview and conversation with the main architect and developers. All seems to indicate that I would be a perfect fit for what they are looking for.

However I have the impression that they have no say on salary negotiations, and even though I might have been a good choice (in my opinion), things may come to a rejection based on what I currently make and am willing to accept - since I don't really need to leave.

I'm being overpaid for the work I'm currently doing, and would I like to keep the same salary or higher for a more technically challenging job - it would justify the higher salary and I would be using my experience effectively.

In your experience, what factors are going to be most relevant for companies to make a favorable decision - what the team needs or what the accountants think is reasonable for the local market?

  • 2
    If you have concerns about the scope of the site (including what is or isn't on-topic), please raise them on The Workplace Meta. Feel free to link to this post and explain your concerns. I plan to flush the comments here soon. – Monica Cellio Jun 9 '14 at 15:13
9

I recently started a consulting business.

I currently need employees, but I'm small so there is a lot of risk incurred from hiring an employee.

The major areas of risk for me are:

  1. Hiring a poor employee.

  2. Cashflow, even for a good employee.

If 1. occurs then I pay out a significant portion of my cashflow to an employee who may damage my reputation, and/or reduce my cashflow in the future by reducing my client retention, etc.

For 2. once I hire someone then I'm responsible for them, so if I have cashflow problems then I'm in a bind.

Note that even large companies care about both of these issues, although the risk for them is lower.

The problem is that these two drivers for hiring/recruitment are at odds with each other... for cashflow (and bonuses, etc. in large companies) I want the least expensive hire, but for competence I must pay more!

I think every company has to balance these two issues in the way that best meets that companies needs.

I am personally going to try to hire very high quality, and I will have to pay for it...

What makes companies pay more than market is usually a need for something fast, for exact experience, or for expertise or niche knowledge.

Also, the smaller the company, the higher the risk for hiring a poor employee, but the smaller the company the more difficult it is to pay above market. For very large companies, there isn't all that much risk for the company as a whole if a poor employee is hired.

Given the above, I suspect that medium sized companies may pay the highest salaries, because they still have some risk, but can afford more. However, some large companies like Apple, Google, and Amazon consistently pay above market (I believe Amazon's policy is to pay at the 75 percentile of market).

Overall, I believe that hiring a poor employee is more costly than paying above market for the long term for a company of any size, and I think a lot of tech companies agree.

  • 1
    Thank you for a thoughtful answer, and I have to agree with your balanced point of view. – user1220 Jun 8 '14 at 19:02
  • 2
    There is a saying that you can get a project done well, quickly or cheaply. Pick any 2. One pays above average when quality and speed are more important than money. – Brandon Jun 9 '14 at 0:36
  • So, in a nutshell, hedging risk. You overpay to increase the likelihood of getting a competent employee. According to your estimates, the extra cost of this is less than the cost of a poor employee causing the business to collapse. – corsiKa Dec 5 '14 at 17:33
  • Of course hiring "high quality" employees all depends on your ability to judge a "high quality" employee. If there was a way to do that reliably then everyone would only be hiring high quality employees and probably gladly paying for them. Unfortunately, there are reams of people that appear "high quality" on paper, do a great job of selling themselves as "high quality" in the interview; but show up to work as anything but "high quality". Paying more, guarantees nothing. About the only reliable indicator is by getting references through people you already know and respect. – Dunk Dec 5 '14 at 22:40
  • @dunk I agree that paying more does not ensure quality, but scrimping on salary does nearly ensure poor quality. On average you will obtain better employees if you pay well. This of course has restraints, no human is worth what current CEOs are paid at large companies. For small companies, I think we have to be more careful, by using a probation period or something similar. Interviews are very poor at estimating technical skill, but most technical people can assess someone's skill level after working with that person for 1 to 3 months. – daaxix Dec 5 '14 at 23:40
3

It's impossible to say, as it depends on the company. Some companies have strict guidelines dictated by HR about "this position pays X amount because the Radford salary guidelines say that's the range and that's it." Some companies have total individual discretion. Most lie somewhere in the middle, with smaller companies having more discretion and larger ones being "that's the rule, take it or leave it," though everyone has a certain amount of cashflow and/or budget that constrains them.

Other than that, it's a basic exercise in supply and demand. You should determine what you are willing to accept (money plus opportunity plus everything else about the job combined), and they will offer based on whether they think you're the best use of that amount of money. If they think they can get someone else of equivalent experience/skill/talent at a lower price then don't expect a high offer. (The reason there is a "market price" at all is because folks of approximately your experience cost that amount on average.) There are a million other factors (like what others there currently make, because having one person paid way out of line causes "compression") but that's the basics.

What causes me to offer above market assuming I have discretion is a) how bad I need the role filled, b) how much of a superstar I think you are, c) 100 other factors. What's under your control is demonstrating your superstar qualities.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.