During the interview process, or even before it, you’re likely to encounter the question, “What is your ideal compensation range?” Answering this question can be difficult, especially if you haven’t done any prior research. However, with the right tools and strategies in place, you can determine the ideal salary range for the job you’re applying for and make sure you’re not underpaid.
In this blog post, we’ll try to answer:
What is a typical salary range?
How is a salary range calculated?
How do you figure out the ideal compensation range for a job?
What is a compensation range?
A compensation range, also known as a salary range, is a range of payment that you would want to receive on a job. It consists of the lowest and highest payable amount. Typically, your salary for the job role will fall within this range.
For example, if a job posting mentions a salary range of $60,000 - 70,000, it means that your salary could be any number within this range. A compensation range can be a good topic for negotiation for the employer, as well as the employee.
According to a 2022 article in Forbes, more than half of all job seekers in the United States outright rejected a job offer when they discovered the intended salary. Job applicants, on average, spent seven hours applying for a job, only to refuse the offer due to insufficient salary.
A salary range is either disclosed in the job description itself or it is revealed to the job applicant during the interview stage. Most hiring managers are adept at handling salary negotiations, and they fully expect the job applicant to demand a higher salary during the interview.
How do employers calculate the compensation range?
Salary calculations tend to be detailed and complex. When deciding on a compensation range, the employer wants to be fair and make the salary attractive. However, at the same time, every employer has a certain budget for each job role that they are mindful of. Here are a few steps organizations take when calculating the compensation range for a job role.
The first step towards setting a compensation range for a job role is to perform a compensation analysis. The organization performs an extensive research to identify what their competitors are paying for a similar job role. The company evaluates the job role in light of the industry it operates in and the educational qualifications/prior job experience that is expected of the potential employee. Geographical location also plays a crucial role. For example, a marketing manager at a small company in the midwest may not be paid the same amount of money for the same job at a San Francisco-based tech company.
Salary is among the most important aspects of a job. After all, it is financial compensation that allows an employee to pay their bills and manage their cost of living. However, most organizations look at salaries as part of a larger compensation package that includes stock options, dividends, employee benefits plans, and other perks offered at work.
When setting a salary range for a job role, an organization also looks into its benefits plans. A company might offer a lower salary, but with a lucrative investment or retirement saving plan. In contrast, they might offer an above-market salary, but with minimal incentives and perks.
Just like people prepare monthly budgets to better manage their expenses, every organization has a certain budget for each job role. Budgets are generally prepared at the start of the fiscal year, and they depend on market conditions.
A company might have set an annual salary of $100,000 for a door-to-door salesman, only to reduce it to $50,000 (or even eliminate the job post altogether) in the wake of the COVID-19 pandemic.
Before posting a job or hiring internally, a company assesses its budget for the role. This also includes considerations on salary growth and the availability of additional benefits.
Even after conducting in-depth research, the organization considers a number of external (uncontrollable) factors when setting a salary range. This includes
Economic conditions. In the wake of rising inflation, increasing interest rates, and fears of a looming recession, an organization may not be able to commit to lucrative compensation packages.
Industry. If the industry is booming and there is a high demand for products and services, the organization is likely to offer a higher compensation package in an effort to recruit the best talent.
Global crisis. The ongoing COVID-19 crisis has taken a significant impact on the global economy. While the demand for online services significantly increased, the public recreation industry took a massive hit. These uncertainties are eventually translated into the salary range offered by different organizations.
What should I put in the compensation range?
Employers are not the only ones to set a salary range for a job role. Before you apply for a job, you should have your own salary expectations ready. If you’re unsure what you should put in the compensation range for a job role, here’s what you need to do.
Do your own homework
Talk to your friends and family and do some online research to figure out the ideal salary range for the job you’re applying to. You should consider the geographical location of the company, whether the job is remote or in-person, the cost of living in your area, and your monthly expenses.
When you’re setting an expected salary range for your job, the minimum amount you quote should be sufficient to cover your cost of living and leave some extra dough for rainy days. This is where preparing a budget and doing some cost assessment will prove useful.
Know your worth
If you don’t want to be underpaid for a job, you should know your worth and how much money you should be making - based on your educational qualifications, skills, previous job experience, and key accomplishments. For example, if you’re switching fields or applying for your first job right out of college, you can expect entry-level pay for that job role.
Talk to the recruiter for that job role
Every job role has a certain budget. If you’re being interviewed for the job role and the recruiter or hiring manager asks you about your salary expectations, you can counter that question with another question, “What is your organization’s budget for this job role?”The recruiter’s response to this question will allow you to determine whether you need to negotiate further.
How to negotiate a salary based on a salary range
During your job interview, the hiring manager is likely to present you with the salary range for that job role. As an interviewee, you should assess the range and determine whether it is sufficient for you. But before you walk into that job interview, let’s look at a few steps you need to take first
Research the salary range
Conduct your research on the ideal salary range for the job you’re applying to. Use a reliable online salary calculator to determine the average amount of salary an employee may make in the role you’re applying for. You should try to be specific with your search. For instance, instead of typing “Average Sales Manager salary,” on Google search, try “Average Sales Manager salary range in Atlanta, GA.”
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Prepare a script
Write down your talking points in the form of a script and practice it as much as you can. Your script should be based on your skills, education, prior experience, and any qualities that make you worthy of a higher salary. By preparing and practicing this script, you’ll be able to present your case for a higher salary to the interviewer in a confident and respectful manner.
Negotiate on the benefits
If the hiring manager offers a lower amount than what you were expecting, you may want to negotiate on the benefits offered by the organization. Some organizations offer a strong benefits package in lieu of higher pay, such as extra vacation days and dental insurance. Evaluate your needs and determine what matters to you most. You can talk to the interviewer about foregoing some of your benefits for a higher salary package.
Show your gratitude
Once you and your employer have agreed on a better salary package, show them your gratitude. Since you’ll be working at that job every day, it’s best to start on a positive note with your employer. If your interview is in person, shake hands with the interviewer.
What if the employer refuses to raise my salary?
If the employer does not agree to increase your salary, don’t take it personally. However, you should consider asking the reason for the rejection. Maybe it’s because of budgetary constraints or market conditions and not necessarily due to something you said or did during the salary negotiations.
Acknowledge that the offer is less than what you were expecting, but don’t rush into accepting it. You can request the interviewer to give you a day or two to think about the revised salary and get back to them. After all, if you really want to work at this company, you shouldn’t do anything to burn bridges at this point.
If you’ve decided to accept the job at lower pay, talk about the possibility of a future increase in pay. Salaries tend to grow with time to keep up with the growing inflation and your tenure at the organization. If the company is not willing to offer you an extra salary today, it might reconsider its decision after you’ve successfully completed a certain time at the organization and/or achieved key milestones.
When posting a job, most employers tend to disclose an expected salary range for that job role. However, this range might not be final.
Before you apply for a job, make sure to do your research to determine the average salary for that job role within the geographical area.
Look at your education, skills, prior experience, and other qualities that could potentially merit a higher salary than the one offered by the organization.
Prepare a script with your notes and observations. This should include a compelling reason why you think you deserve a higher salary than the one offered by the company.
After the job interview is over and your employer has agreed to revise your salary, show your courtesy and gratitude to the interviewers.