Mature organizations with robust processes and practices have established compensation norms, for various bands, hierarchy levels, and functions. These compensation levels are derived based on Job Analysis, Job Evaluation supported by Compensation Benchmarking exercises. Some company may also arrive at these norms based on their industry benchmarks and their business projections.
Normally mature organization’s try not to play with their compensation structure and levels to suit the purpose of hiring any specific candidate unless and until there is some kind of established business urgency for the specific candidate / talent. Playing with the compensation norms for bands and levels can lead to some serious pitfalls. Every HR and Business Hiring Manager must understand that compensation stories which are supposedly confidential – are bound to leak either through the new hires, or the HR or some one else in the system. And once the stories are out it can:
- Give a wrong signal to job applicants, who may start assuming that negotiation is the key.
- Upsets the “apple cart” within the organization, and may lead to dissatisfaction amongst existing employees.
- May upset the people budget of the organization.
For companies in start up stage, small, mid size companies and even larges companies – without established norms on compensation, some ad-hoc decisions get taken. These may be based on:
- Need & criticality of the role for the function, and for the business.
- Need & criticality for hiring any specific talent.
What kind of compensation jump should Job Seekers look for, when they plan to change jobs next ?
If you are a job seeker – it is essential to know of the compensation practices of the company where you are planning to apply for a position so as to be able to get the best deal in terms of compensation. This can help a you plan your efforts for compensation negotiation once you receive an offer.
Hiring Managers, award compensation offers to prospective employees keeping in view their internal benchmarks. Since they have to match a reasonable jump for new hires, an effort is made to attract or profile people at at least one level below, so as a compensation jump looks reasonable and attractive to them.
Example: Company ABC is looking for a Manager at 10 – 12 Lakhs compensation level. It wont look at people who are already at that compensation levels. It may look at Asst. Managers at comparator companies , who are presently at a compensation levels of about 8 – 9 lakhs.
Case A: If you end up offering a person who is currently at 8 Lakh, a compensation of 10.4 lakh, it’s a cool jump of 30 %.
Case B: However, if your shortlist has some one already at 10 Lakhs, you can at best offer him 12 Lakh, which is near to an industry average jump of 20 %.
Going forward on Case A:
If the candidate is found to be really strong and relevant, and the position is a critical one, and the the candidate shows his reluctance to join at 10.4 and asks for a compensation of 12 L, the company may decide to make an offer thus leading to a cooler jump of 50 %.
Having heard the story of a Case A, from some one should not get you an idea that you can easily expect a 30 % or 50 % jump while shifting to Company ABC.
It depends ! Do your research well, and be good at what you do, is the only advise that we can give you.
Praveen is the Founder & Principal Consultant of KHEdge, a boutique HR & Business Process Advisory firm. Over last 15 years he has advised & worked with promoters, founders, business leaders, HR leaders in areas of - Business Strategy, HR Strategy, Organisation Design etc.