The recruiting process consists of multiple interview rounds, and salary negotiations are the final steps of the process. According to a Glassdoor report, salary and compensation are among the top 5 factors that candidates consider while interviewing for a position, followed by growth opportunities, work-life balance, job location and company culture. Technological advancement and an abundance of employment opportunities have enabled candidates to understand their worth and not settle for a salary less than they deserve. Therefore employers are involved in a "recruiting war" to hire A-grade candidates in the salary range they offer. Thankfully, with the right strategy, any employer can discover and recruit top deserving candidates while polishing their recruiting process on the go.
Knowing what appeals to the candidates more allows you to divide a strategic recruiting process and reduce your "time-to-hire". As salary and compensation are the top consideration for candidates, offering the proper compensation can make a lot of difference. Defining the appropriate roles and responsibilities, negotiating salary, and adding more incentives and allowances can allow you to hire top talent without compromising your company's recruiting policies.
Understanding the Salary structure
Many human resources representatives find themselves overwhelmed when it comes to negotiating salaries. You don't want to lose a deserving candidate by lowballing your offer. Therefore it is essential to get your facts straight to make an offer they cannot refuse. To do that, you need to know the details of the salary structure so you can fine-tune your strategy when you negotiate the salary with the candidate.
Organizations pay salaries and compensations to their employees in exchange for the services they offer. This salary paid by the companies is made of various components which make up the whole salary paid to the employee. The salary structure is a detailed breakdown of various components of the salary. It offers your employees a clear view of various elements that make up their salaries, whether their allowances, taxes or the final salary amount they receive. Even the slightest change in any of the components can significantly impact the final compensation as well as various other factors such as tax exemptions climbed by the employee. Therefore it is essential to understand the salary structure to take the proper steps when negotiating the salary with the candidate. It would also help you revise the pay after a certain period, such as promotions or demotion. Now let's take you through the salary structure.
Here are some of the critical components that make up the salary.
1. Basic salary
The basic salary consists of 35-50% of the employee's total salary and is the base income of the employee. It is the fixed, base amount paid to the employee before any reductions or increases due to various factors such as overtime, bonus, absent days, unpaid leaves and allowances. The employee's designation and the industry they work in determine the employee's base salary. It's also important to understand that the amount of basic pay is fully taxable.
Allowances are paid to the employees during their course of duty. This variable allowance amount can change based on the company's salary policies. The amount can also vary for each employee based on their designation and contributions to the company. The number of allowances can be partially or fully taxed. Here are some of the types of allowance:
- House rent allowance
- Leave Travel Allowance
- Conveyance Allowance
- Medical Allowance
- Books and Periodicals Allowance
Gratuity is a lump sum benefit that employers pay to retired employees who have completed five or more years in the company.
4. Employee provident fund
An employee provident fund is a benefit for the employee in which the employer and employee invest each month.
5. Professional Tax
Professional tax is the tax paid by salaried individuals to the state government, and each state can have different methods to calculate professional tax.
These are the on-cash benefits that employees receive as a part of their designation. Some examples of perquisites are rent-free accommodation, a company car for personal and professional use, etc.
Now that you have understood the salary structure, you can strategically negotiate the salaries by making alterations in any of the above components. To help you further in the negotiations, here are three tips to effectively negotiate salaries with the right candidate.
3 Tips to Effectively Negotiate Salaries With the Right Candidate.
1. Don't wait for the end to discuss numbers.
Though salary shouldn't be the first state to start your interviews, you shouldn't wait until the end to discuss the number. It's always good to have a ballpark amount in the discussions so you and the candidate are on the same page. It would waste your and the candidate's time to go through the entire recruiting process only to know that you both have different amounts in mind.
2. Publish salary range in job postings
Publishing the salary range in the job listing may not be suitable for all openings, but it saves a lot of your time. When you post a salary range in the posting, candidates who think it's low for them won't apply for the position. That way, you interview only the ones who agree to the salary range you offer.
3. Leverage industry data
Industry data can be of great help when it comes to setting the salary range and negotiating the salary. You must do industry research to find out what salary ranges other companies in your industry offer for the same position. That way, you have a reference point to have the upper hand during the negotiations.
Each employee deserves fair compensation for the contribution they make to the company. At the same time, companies have the right to offer what they think fits best to the position. Understanding the salary structure enables recruitment officers and HR heads to negotiate salaries and benefits while abiding by company policies.
Salary payments don't have to be your headache, especially when you can trust Teamnest's highly sophisticated and reliable payroll system. Countless clients trust our Managed Payroll Services to run their administrative payroll operations while abiding by the compliances and regulations. That's how we achieve accurate and highly transparent payroll management.
What are you waiting for? Contact our TeamNest expert TODAY @ +91 913-786-6322 or email at email@example.com to transform your HR and payroll operations and put your business on the path to success.