Factors Affecting Compensation - Part II

In the previous article, we looked at some of the factors that help the employers determine the level of compensation to be given to employees. In this article, we look at the factors that affect compensation from the perspective of the employee. What this means is that the employee should not be constrained by the amount of compensation that the employer provides him or her and can and should negotiate with the prospective employer until he or she is satisfied with the outcome.

Of course, there are several kinds of negotiation with the employer. For instance, the employee can negotiate at the time of the hiring process or can negotiate at the time of the appraisal cycle. In this article, we consider the strategies available to the employee at the time of the hiring process.

There are several parts to the employee’s strategy to negotiate with the employer. Some of them are:

  • Plan and Communicate: The most important part of the employee’s strategy must be to research the compensation trends in the market and then negotiate with the employer based on how much the other companies are willing to pay for a similar role combined with the fact that the company hiring him or her pays for the same role. Hence, it is advisable for the employee to keep in touch with compensation trends in the marketplace and also talk to other employees before he or she decides to communicate his or her expectations to the prospective employer.

  • Timing makes the difference: In any negotiation process, time is the key element and hence timing the negotiation process is important. The best possible option for the employee would be to wait for the company to make an offer and then pitch in his or her expectations about the compensation. There is something called overkill which must be avoided and the employee must avoid going overboard. At the same time, the employee must also ensure that he or she does not start the negotiation process early on in order not to lose out on the offer. Hence the timing of the pitch makes all the difference.

  • Consider the Alternatives: When you are deciding about prospective offers, ensure that you make the pitch for your expected compensation level after taking into account all the alternatives and not simply rush into something that does not value your experience and expertise adequately. At the same time, do not harangue the prospective employers though you might have several alternatives available to you.

    The point to be noted is that different companies react to compensation negotiations in different ways and hence you must play the field according to these points.

Many a time, prospective employees lost out on compensation either because they asked too high or asked too late. At the same time, they should also remember not to coerce the employers. The best possible strategy is where you are confident about yourself and your worth as measured by the employer must reflect your own sense of self worth. When there is a meeting point between these, then you can rest assured that you have arrived at the ideal compensation for yourself.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.