Knowing the position of your salary offer in the salary range will tell you the company’s evaluation of your ability to handle the position on your starting date. If you receive an offer of $3000, in this example the minimum / entry-level of the salary range, and you believe you are coming on board with significant experience, knowledge, and skills to perform position duties beyond entry-level ability, then What you need to know to negotiate a higher salary
When you receive a position offer, it is important to know where your new salary is in the salary range for that position. For example, your new offer is $4000 / month. And the company’s salary range for your new position is $3000 to $5000 / month; your offer is at the midpoint of the salary range. Midpoints of salary ranges are the market competitive pay point for you position. So your offer assumes that you are fully capable of performing the position requirements with minimal training. If your offer was $3000, the company assumes you have entry-level ability and you require significant training to perform the full range of the work.
Why is all this important?
knowing the offer’s point in the salary range will give you some leverage to negotiate a higher salary.
This applies to your current salary with your present company. You salary’s position in the salary range is indicative of the company’s evaluation of your ability to do the job, based on your skills, knowledge AND performance of job duties and responsibilities.
Creating a compensation structure is an involved, technical, and analytical process. It is not uncommon for companies to utilize consulting firms and/or consulting firm research to develop and maintain compensation structures relative to the market for their specific industries.
Here is an example of a salary structure used across multiple functions. The salary ranges shown are annual salaries.
Generally, the following is the process companies or their consultants use to establish a structure:
Step 1: Determine the organization’s compensation philosophy, for example the midpoint of the salary range is the market competitive pay point.
Step 2: Conduct a job analysis to define position duties and responsibilities
Step 3: Group positions into job families
Step 4: Rank positions within job families.
Step 5: Conduct market research to determine the position’s competitive pay point (midpoint of the salary range)
Step 6: Create job grades
Step 7: Create a salary range based on research. For example:
The formulas for a 30 percent range using the midpoint as the base are:
Maximum = Midpoint x 1.15 Minimum = Midpoint x 0.85
Based on competitive data, ranges can vary in the percentages companies use to define Minimums and Maximums.
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