Does salary negotiation always have to happen based on one's last salary or do they consider one's last highest official package also?

Question

Does salary negotiation always have to happen based on one's last salary or do they consider one's last highest official package also. There could be reasons, why somebody might take a pay cut for some other benefits(to learn more skills as an example or some other reasons) when some one decides to join a new company.

What is right here or what isn't as a starting point to discuss the salary negotiation if one wants to move on to another company from the last company where they decided to join with a pay cut. I'm not sure if there is a fixed answer to this question, but I would like to know how are these kind of questions generally dealt with and what is right here in HR terms.

I have seen some HR folks considering only the previous package, while others seem to give weightage even to one's highest working official package received so far. As any candidate seeking a new job, considering only the previous package doesn't really seem very fair to me.

Would like to know what is right here so that a candidate can appropriately put some facts forward with the HR when having this discussion if that person is in such a situation. Any articles or pointers on this would help.

Thanks.

Answer 1

The only one-size-fits-all answer to your question is that it depends. Companies have the policies they want and you are looking for consistency and uniformity where there is none.

You can make any argument you want but an argument that flies with one company will go over like a lead balloon with another. Back when I was young and stupid - now I am just stupid :) - I successfully advocated to my management that we pay one of our temps, a Soviet refugee, $1 more per hour for counting cars on the ground that he had a tech degree. Three months later, he applied for a part-time job with us to write computer programs the minute I told him I was going to be his boss. I successfully advocated with my management that we hire him AND got him $1 more per hour than what they were originally planning to pay him when I argued that he had worked for us and that he was a known quantity to us. He didn't know a lick of computer programming, of course, but no worries, I worked him to death :) I know I wouldn't get away with that argumentation at other firms I worked at.

Answer 2

From the candidate's perspective, the person's previous packages and salaries are irrelevant. Only the salary range for the new role is significant. For example, if someone was a junior role before but is now applying for a manager position, the salary range for the manager position, not the junior role, should be considered.

Of course, the hiring organization will try to pay as low a package as it can. It is usually a business and its aim is to make money.

Therefore, the candidate should do some general research about salary ranges for that type of position or speak to someone at the hiring organization to find out more. He/she should avoid talking about previous salaries if possible, as this may influence the hiring organization to pay them less.

Remember to keep the total package in mind, not just salary. For example, training, superannuation/401K, leave or travel/car allowance or working from home may boost a low salary. Also do not be afraid to negotiate. This may surprise HR or the hiring manager, particularly for junior roles, but it is good practice for more senior roles.

Promotions within the organization may not come with a salary increase because the organization knows the promotion is usually valuable enough by itself. Changes are usually made if the package changes (e.g. moves into a sales position where they are paid on commission, unlike their previous role, moves countries) or if there is a huge difference between their previous salary and the new salary range.

Answer 3

The most common question on forms that I have seen is "what is your current salary?" - no questions about the whole package, but often recruiters will dig around to make sure they understand your current compensation in total, so that they don't get a surprise if they make an offer.

Economies change over time, so generally I have seen little weight given to "highest package" - this isn't a math test, this is an economics problem. The price they want to pay is the cheapest price that they can for a reasonable skill level with a reasonable expectation that the candidate will stick around for a while. The price you want is the highest you can get for your skills right now.

Over time, the prices for a given job skill will change. Technologies fall out of fashion, salary ranges change with the market, etc. For example in the dot com crash in the early new millenium, most US New England engineers ended up with a $10K pay cut, those that had salaries that stayed fixed counted themselves lucky. Even the norms for what a company will or won't negotiate will change.

You're more likely to get what you want by convincing them that you add special value to their company and that you could easily get a job today that pays what you demand than you will with a long discussion of why and how you got the best package you ever received.

Answer 4

In my experience companies allow very little wiggle room regarding benefit packages. The bigger the company the less room for negotiation.

The company may allow the employee some options (level of insurance of even no insurance), they may start experienced employees at a higher level of vacation, but the rest of the benefits are standard.

They also have a range of salary they are willing to pay for the position. They have based this range based on the requirement to make money. In some cases the contract that you will be working was priced so that the maximum salary was calculated. If you need more than that they will have to put you in an slot, or go with a candidate that can fit withing the salary range.

You as the person being considered for the job have to balance the offered pay and benefits with your current situation. And by current situation I also mean your current state of employment. If you have a job and are in no danger of losing your job, then you can try and negotiate: if they won't negotiate then walk away, if they do negotiate and meet your standards then accept the position. If you are unemployed then the amount of money left in your bank account will be an important factor.

Now with smaller companies I have seen a willingness to be more flexible with pay and benefits, because they are less likely to fear that thousands of other employees will demand the same benefit. Of course in some cases the willingness to be flexible brings financial pressures to the company.

I have known companies that have offered greater time off if the new employee doesn't need healthcare coverage, or if they have 10+ experience and would not be happy with starting with 2 weeks of vacation.

I know that one HR function is to compare pay and benefits with known competitors, but I have never known a company that asked for an official pay and benefits package as a part of the hiring process. The comparison is done to set pay and benefits for all employees, or employees in a specific job category or location.