The majority of employers are open to negotiating salary for some or all positions once a job offer has been made, but that openness does not extend to bonuses and benefits, according to a new survey.
Nearly 90 percent of the 324 organizations that responded to XpertHR's Recruiting and Hiring Survey 2021 said they are flexible about negotiating salary with job candidates—at least for certain positions—but only 42 percent are open to negotiating bonuses, and just 32 percent are willing to negotiate benefits.
"The survey results show that employers are much more likely to negotiate pay with a prospective hire than benefits, something job seekers may want to keep top of mind when presented with a fresh offer of employment," said Andrew Hellwege, XpertHR surveys editor.
Total rewards experts agreed that the survey results reflect consistent practices that have been in place for years, especially at midsize and large organizations.
"Salary has traditionally been viewed as more flexible because it is commonly accepted that pay is influenced by a variety of factors, including the organization's compensation philosophy, as well as a candidate's experience level and expectations," said Marta Turba, an expert on total rewards strategy and vice president of content at WorldatWork, the association for total rewards professionals.
Tom McMullen, a senior client partner in the Chicago office of Korn Ferry and a leader in the firm's North America total rewards expertise group, agreed that "base salary is typically where the negotiation happens. There may be more flexibility in creating a tailored, custom reward package around the specific requests of an employee in a smaller organization, where there may not be as much structure and consistency in the base pay, incentive and benefits programs.
"In medium to large organizations, typically benefits are not as open to negotiation because the intent of the benefits package is that it applies to all employees in an employee group within an organization. It is a consistent part of the rewards package that all employees receive by virtue of being a member of the organization."
WorldatWork's Turba added that traditional benefits programs like health care and retirement are highly regulated and based on universal, nondiscriminatory standards that would prevent flexibility in negotiation. "By contrast, ancillary programs like hiring bonuses, flex schedules, paid/unpaid time off and educational assistance are more likely to be negotiated," she said.
Employers are less likely to negotiate structured short-term incentive plans such as bonuses because they are an integral part of the total cash compensation package, and most employers have a standardized plan design, Turba said. "Targets are set at a rate that appropriately incentivizes performance and connection to business results in a specific role, and deviation from the set plan may create inappropriate incentives, pay inequities, market competitive challenges and administrative burden."
McMullen added that incentive programs often consist of enterprise or team performance instead of or in addition to individual performance. "However, it can be a reasonably prevalent practice in some organizations to offer either a guaranteed incentive or bonus for the first year of tenure in a new organization as a bargaining chip. Sometimes a signing bonus will serve in this capacity to offset some of the risk in the candidate joining a new organization."
Addressing Pay Inequity
A contentious issue generated by the practice of salary negotiation is the high risk of creating or perpetuating pay inequity within an organization, Turba said. She outlined a few common scenarios that often drive pay equity concerns:
- When the salary offer is extended without a deep understanding of qualifications.
- When the salary offer is made in consideration of the work group but not the organization.
- When a higher offer is made to overcome a real or perceived labor market shortage.
- When the offer is based on pay in a prior position.
Proponents of the recently reintroduced Paycheck Fairness Act contend that more transparency from employers during salary negotiations would help close the gender wage gap. The bill would ban employers from asking applicants about salary history and prohibit retaliation against workers who discuss wages. The proposal has unanimous support among Democrats in Congress and the support of President Joe Biden.
Salary-history bans have been enacted for all employers in 19 states and territories, and newly introduced state bills would require employers to provide compensation ranges for open positions.
Turba recommended ways employers can do their part to address pay inequity:
- Establish strong foundational structures, such as consistent job-evaluation processes, salary structures and pay determination guidelines.
- Establish firm pay rates and ranges to provide more transparency.
- Cultivate strong interview techniques that get at the value of knowledge, skills, abilities and past accomplishments.
- Document negotiations during the offer process. "This data is invaluable later when your organization conducts pay equity analyses to validate that pay outcomes are in line with intentions," she said.
Turba explained that U.S. regulations ensure consistency and nondiscrimination in benefits offerings, but there is no guarantee that consistent offerings translate to equal value in the workforce. "It is likely this perceived disparity in value that's sparking the interest or need to negotiate benefits," she said.
"We are seeing that employers are actively working to address this by infusing more personalization and flexibility in benefit offerings, knowing that their offerings must work to attract and retain workforce segments with very different needs and expectations. Social determinants of health are not uniform for all employees in an organization, and it is unrealistic to expect a one-size-fits-all benefits package to be effective."
Flexibility in benefits is the critical element to achieve fairness, she said. "This flexibility is much more likely to surface in areas related to work exchange, flexible working hours, location, extra vacation time and child care needs versus traditional areas of regulated benefits, like health or retirement planning. We've seen an acceleration of this in the past year with COVID-19."