Simple Steps To Determine Starting Pay For New Hires

Here's a familiar scenario: you, as the HR Manager, are under pressure from the hiring manager to extend a job offer (right now!!) to a candidate for an open job in his department. He wants to offer them a salary that you think is too high, based on your gut instincts and your pulse of your competition's pay packages. The candidate's salary history has ramped up significantly over the past few years due to an increased demand for his specialty. If you acquiesce to the hiring manager's intended starting salary, it will create problems in internal equity for your company. You realize you'll have to increase other employee's pay simply to retain your "older" employees.

What's a HR Pro to do? Here are your options:

A. Defer to the hiring manager and prepare yourself for inevitable pay increase to "older" employees pay in the same job.

B. Evaluate the applicant's educational achievements, work history, references, and salary history, and internal equity to determine his starting salary.


C. Or, blend factors in option "B" with data from industry salary surveys for your geographic location and company size to determine beginning pay.

Let's discuss the pros and cons of each option further to determine the best outcome for you.

Option "A" is a "quick fix" and serves to ease the pressure you're receiving from the hiring manager. But in your gut, you wonder whether it was really the right thing to do and brace yourself for more upcoming work in employee relations. More work, quite simply because once your existing employees find out what the new person is earning, they'll be in their manager's office complaining that they aren't paid fairly. And they're probably right. This is known as compression in compensation terms, when outside factors negatively influence internal pay rates for existing employees. In this scenario, the new hire's higher rate of pay brings any discrepancies in pay into the limelight, creating problems for the organization.

Option "B" is more holistic in its approach, but still doesn't take market rates for pay into consideration in determining pay for your new hire. You're on the right track, but you still need to research market rates to make a sensible offer that doesn't break the budget and create costly employee relations problems for you down the road. This is the approach that most organizations take in determining beginning pay for new highs. They are making the decision based upon what they know yet a key component is missing.

Option "C" is the best solution because you are making an objective decision based upon as much information as possible. Research what salary surveys provide quality data for your industry, jobs, and geographic location. Frequently these salary surveys can be purchased through an industry association that your company is already a member of. You can save significant dollars by participating in the salary surveys every spring, and expect to receive your copy in late summer.

Always remember to evaluate any potentially discriminatory pay practices under any scenario. This means that an employer needs to pay people performing the same job having "equal skill, effort and responsibility" comparable rates of pay based upon their educational background, prior work experience, performance, etc. You cannot discriminate on the basis of sex under The Equal Pay Act of 1963. To learn more, go to http://www.eeoc.gov/policy/epa.html.

Do your research on what published salary surveys best meet your company's needs, then invest in purchasing a few to have on hand. You will quickly recoup your cost through dollars saved in new hire offer packages. Remember that information is a powerful tool in assessing beginning pay rates for new hires. Do your homework, build your case, and you'll be viewed as a true partner and resource to your managers from the beginning to very end of your recruitment process.

Copyright 2008, Regan HR, Inc.

Becky Regan, M.A., CCP began her own consulting practice in 1995, Regan HR, Inc. to provide human resources consulting services to businesses in California. She has been successful in growing her business through reputation and client referrals. Her work as a consultant includes the full spectrum of HR technical expertise, including C-level recruitment, compensation studies (design, market and executive pay studies, sales compensation plans), training & teaching, interim assignments as a HR Director for organizations, and employee relations, including workplace investigations and written responses to formal complaints. For more HR tips and to receive my FREE "The Top 5 Secrets to Building a Better Organization that Every HR Pro Must Know" go to [http://www.ReganHR.com]

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