How to handle salary negotiations and employee compensation during recession recovery Featured

7:00pm EDT November 25, 2010

Employee compensation has been a hot topic during the recession. Many employees have taken on additional responsibilities due to downsizing within the company but may not have received additional compensation for these new duties. Some of these employees may have even taken a pay cut just to keep their jobs.

You may run into problems retaining these employees after the recession ends if you don’t properly compensate them or negotiate a fair salary. Offering pay increases or bonuses may not be an option at this time, so you need to develop nonmonetary compensation options, continue to maintain a positive work environment and address any concerns upfront with employees.

“Ignoring salary negotiations only exacerbates an already bad situation,” says Jessica Ford, director of sales and operations with Ashton Staffing. “Employees may feel discontent about their salary and simply not discussing the issue may make them feel that they are not important and their worth is solely based on salary. Try to involve employees when possible and let them understand the company’s current financial situation.”

Smart Business spoke with Ford about key things to include in salary and compensation negotiations and how to develop nonmonetary compensation packages.

What are some key things you should understand about salary negotiations and employee compensation?

Negotiation is not about winning, unless both parties win. If either party feels they have not negotiated, both parties lose. Make every effort to identify the most recent salary and benefits your employee or potential candidate received. Ask an employee candidate to provide a W2 or proof of salary during negotiations instead of simply asking about his or her desired salary. You can also find this out from former employers when conducting reference checks. You may not be able to match the salary, but you will have a good idea of what the candidate will seek during negotiations.

Arm yourself and do your research. Be sure to reference your current internal salary ranges, the salary of current employees in similar positions, the profitability of your company, as well as the job search market in your area and the economic climate.

Even if an employee has positively impacted your company, you need to keep your salary limits in mind. You will save yourself years of headaches and prohibitive costs by doing this, even if you have to start your recruitment process over or tell an employee that salary negotiation is not an option at this time.

What are some common mistakes employers make regarding employee compensation, and how can they mitigate those mistakes?

Some employers have simply blamed the maintenance or reduction in employee compensation on the recession and have not come up with alternative ways to reward employees. Reducing employee discontent due to employee compensation is dependent on the total work environment you offer employees. Think outside of the box. Sometimes the biggest mistake employers make is to think that employees only care about a monetary salary. Offer other incentives that shift the focus away from monetary awards to employee recognition. This can lead to higher productivity.

How can you develop nonmonetary compensation packages for employees?

  • Offer a balance between work and life. Allow flexible starting times, core business hours, work from home options and flexible ending times. Employees will deter from a fixation on salary if they feel like they have a balance and some freedom.
  • Offer an attractive and competitive benefits package, if you are able to, with components such as life and disability insurance and flexible hours. An employee can be content with a low- to midrange salary if a strong benefits package is offered.
  • Select the right people from the beginning through behavior-based testing and competency screenings. Offer performance feedback and praise good efforts and results.
  • Do your best to create a fun work environment, because people want to enjoy their work. Engage and employ the special talents of each individual, and involve employees in decisions that affect their jobs and the overall direction of the company, such as the discussion of company vision, mission, values and goals.
  • Continue company traditions, such as holiday parties. This gives everyone something to look forward to and adds an element of fun into the workplace.
  • Remember to take an interest in your employees. Respect their ideas and listen to them. This small gesture can make an employee feel needed and that he or she has a purpose in everyday tasks, beyond just receiving a paycheck.
  • Provide opportunities within the company for cross-training and career progression. People like to know that they have room for career movement.

How can you handle employees who are not happy with their salary and the negotiation process?

Remember to always be honest with your employees and never promise them anything that you cannot offer. Tell your employees upfront if it’s absolutely impossible for your organization to address salaries at this time. Be sure to balance this with some kind of nonmonetary reward. This is necessary in order to maintain a healthy and happy work environment. But if you are confident that your company will have a good year, set a date as to when your employees can expect a raise or bonus.

Jessica Ford is the director of sales and operations at Ashton Staffing. Reach her at (770) 419-1775 or jford@ashtonstaffing.com.