Preparing the Offer: New Hire Salary Negotiations

Crunch time! You have been through the laborious process of recruiting, interviewing and selecting a new hire. Now you need to make that all-important offer. Many agency principals treat this aspect of the hiring process a little too casually. You need to cover all the bases, so there are no misunderstandings to potentially sour the new employee-employer relationship as you move forward. If you handle the offer correctly, the employee will be happy, and you will walk away from the table feeling you got good value for your dollar.

Start by taking pencil in hand and determining how much you can afford toward hiring your selected candidate.

Begin with a fair and reasonable offer. You’ve invested plenty of time and effort to find the perfect employee. Don’t blow it by lowballing the offer. Ideally, you investigated the going rate in your area for the position before you began recruiting, and set a low-to-high range for salary. Determine if you can stay close to that or must go lower. How much is the candidate worth to you? Can you go higher than the going rate if necessary? How much higher will you be willing to go? The initial offer should be slightly lower than you actually hope to pay. 

Review benefits(vacation; sick days; personal days; life, disability, health and vision/dental insurance). What will they be eligible for at the start? What will they be vested into, and over what period of time? Calculate the value of this package. 

Consider raises. Be prepared to explain the performance review schedule and standards for determining raises. When will they be eligible for a performance review with raise? (Keep a 60, 90 or 120-day performance review with a raise attached in your back pocket as a possible deal sweetener. Make sure management signs off on this extra offer.) 

Don't forget bonuses. Offer an end-of-year bonus. Explain how bonuses are awarded. Provide a five-year performance history and the five-year average on bonuses. Be honest about whether this year's bonus will be similar to that average figure. Avoid lump-sum signing bonuses—if, in spite of your excellent interview process, a new employee leaves within the year, you will be out the bonus with nothing to show for it. 

List any incentive compensation(profit sharing, 401(k), stock options, etc.). Set the schedule for eligibility and vesting. 

Draw up a list of other perks—company car, cell phone, travel and entertainment expense reimbursement, memberships, tuition reimbursements, etc. Calculate an estimated value.

Calculate the value of the benefits-plus-incentives package separate from the salary. Adjust your salary offer down or up based on the value of the benefits and incentives. 

Decide how negotiable you can be and on what points. Leave yourself some room to maneuver. 

Put your opening offer in writing. 

Have your legal counsel review a copy of your employee contract. Let the candidate review the contract. It may need adjustments per your final agreement. Legal counsel should sign off on all revisions to the contract.

Schedule a face-to-face meeting with your candidate. Once the offer is on the table, do some gentle probing to get a feel for whether the candidate is happy about the offer, or feels it could be better. You may want to hold in reserve some of the extras you offer, to use as counters to attempts to increase the basic salary deal. If the candidate wants way more than earlier interviews led you to expect, you need to consider carefully whether you can afford them vs. let them get away. Don’t make a hasty decision; ask for time to reconsider the offer.

For heaven’s sake, don't pay what you cannot afford. No new hire is worth putting the agency in jeopardy through too heavy a drain on the cash flow.