Why Do Companies Hesitate to Offer More Than a 10% Salary Increase?
Picture this: a recruiter reaches out to you with an exciting job opportunity that promises a salary in the range of £80k and above. As the conversation progresses, you’re asked about your current earnings, and you make the mistake of answering truthfully—£50k. Suddenly, the prospective offer dwindles to just £55k.
This frustrating scenario raises an important question: why do companies seem reluctant to offer more than a 10% increase on your previous salary?
When recruiters first connect with candidates, they often emphasize the potential and value of the role. If the job aligns perfectly with your expertise and fills a critical gap in their organization, you’d expect the compensation to reflect that need. One might assume that if you’re skilled enough for the position, the wage should match your experience and the market demand—especially for specialized roles where your expertise is indispensable.
In this situation, you’re not stepping into a trainee position nor are there varied levels within the role. The company seeks a candidate with a unique skillset due to a knowledge void within their team. It stands to reason that the salary should correspond to the value you’re bringing.
Moreover, why settle for a mere £5k increase in a demanding position when you can secure the same elsewhere with significantly less stress? It’s clear that companies need to reassess their approach to salary negotiations if they wish to attract and retain top talent, especially in specialized fields where expertise is rare and highly sought after.
In the end, salary should not just reflect your current earnings but should also acknowledge the expertise, scarcity of skill, and the vital role you will play in the organization.
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It’s certainly frustrating to find yourself in this position, and you’re not alone in experiencing this common challenge. Many companies adhere to a policy of offering around a 10% increase over a candidate’s current salary due to a few prevailing reasons rooted in both market practices and internal business considerations.
1. Market Benchmarks and Internal Equity: Companies often rely on salary benchmarking against industry standards and internal compensation structures. They aim to align new hires with current employees’ compensation to maintain a consistent pay structure. Offering significantly more than your current salary might disrupt their internal equity, leading to dissatisfaction among existing employees in similar roles.
2. Budget Constraints and Risk Management: Businesses typically set budgets for specific roles based on their financial forecasts and goals. Offering substantially more than a candidate’s existing salary can strain these budgets. Additionally, companies view hiring as an investment. Offering significantly higher than your stated salary introduces perceived risk: what if it doesn’t work out? Thus, they proceed with caution.
3. Psychological Anchoring: Your current salary acts as an anchor in negotiations, often unconsciously. When you disclose your salary, it sets a base from which employers calculate their offer. This practice is partially designed to control costs and avoid overbidding for talent, even when the role is specialized or critical.
Practical Advice for Navigating Salary Discussions:
Research and Preparation: Before entering salary negotiations, thoroughly research the market rate for your position and experience level. Use resources like Glassdoor and Payscale, and engage with industry forums and professionals. This data will arm you with a fact-based approach to negotiations.
Focus on Value Proposition: Highlight your unique qualifications, experience, and specific achievements that align directly with the critical needs of the role. Emphasize the value and efficiency you bring, especially if your skills significantly impact the company’s goals.
Salary Expectations Over History: When discussing compensation with recruiters or potential employers, pivot the conversation away from current earnings and toward market expectations or your salary range based on industry standards and the role’s demands.
Consider Total Compensation: Evaluate the entire compensation package, including benefits, stock options, bonuses, and other perks that may not be reflected in the base salary. They can substantially raise the value of the offer.
Be Prepared to Move On: If negotiations stall and the offer doesn’t meet your expectations or value, be prepared to walk away. Your skills are valuable, and finding a company willing to recognize and
This post highlights a crucial aspect of salary negotiations that many candidates encounter but few discuss openly. The 10% cap on salary increases is often rooted in outdated compensation practices and a conservative approach to budgeting. Companies may default to this figure due to internal equity concerns or a lack of awareness about actual market rates for specialized positions.
However, this ‘allergy’ to higher offers overlooks the true cost of turnover and the value of investing in talent. When organizations fail to meet the financial expectations of skilled employees, they risk losing not just their prospects but also engaged team members who are actively contributing to success. Additionally, companies should recognize that talent acquisition is an investment. Hiring someone with a strong skill set often translates into higher productivity, better innovation, and reduced costs in the long run.
It would be beneficial for companies to embrace a more flexible and market-responsive approach to compensation, particularly in competitive fields where demand significantly exceeds supply. This could include developing clear criteria for salary negotiations that take not just current pay into account but also the value the candidate brings to the organization. By recalibrating their mindset around compensation, companies can position themselves as attractive employers, ultimately fostering a culture that values skill and experience over rigid salary structures.