Salary negotiation for employers

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Salary negotiations require thorough legwork and it is, among other things, important that you have a good sense of what your employee expects in terms of pay and how your employee has performed. In addition, the salary negotiation can be about something other than salary, for example employee benefits, stock options or paid lunch.

In this article, we will therefore make you smarter about how you can prepare for your upcoming salary negotiations.

How do you prepare for a salary negotiation?

Before the salary negotiation, it is crucial that you know the employee's salary level and expectations for salary. In addition, you must have a good sense of how the person has performed. Here you can check, for example, whether the employee has fulfilled a number of objectives or KPIs.

It is typically the employee's own initiative that can define the salary negotiation, unless you want to reward your employee for a special performance. Furthermore, it can also be the employer's initiative if, for example, you want to retain a key employee.

Before the salary negotiation, you as a manager can also demand that the employee prepare a written presentation that includes results and the outlook for next year's possible results in the position. This presentation should also include a proposal for their monthly salary increase.

A benchmark in relation to salary level can be the market salary for the same position, including salary ranges, experience, theoretical ballast, potential and what your other employees in the same position are paid.

During the conversation

The salary negotiation can be an obvious opportunity to assess the employee's performance, possibly justifying a higher salary. It can not be about decreasing an employee’s salary if they are underperforming.

It is therefore essential that you create a further overview of the employee during the interview. Thus, it is not relevant to ask how much the employee wants in salary.

Instead, you can ask the following questions:

What areas can you improve on?
Where do you think you have created the most value for the company and how is this expressed?
What things do you wish were different?
How can we measure your development and the results you have helped to create?

That way, you can have a constructive conversation and find a solution that suits both parties.

After the salary interview

A salary increase is not always a given, especially in smaller companies that have limited financial capital. Therefore, employees typically receive a higher salary when they do something extraordinary or have improved their skills in their field. This could be, for example, if the employee has been given more managerial responsibility.

In addition, it is important that you keep your employee up to date with the salary interview you have had, so that the new salary is not given in advance, but is instead based on the results you have agreed upon during the salary interview.

In the next section, we will give you 10 ideas for which elements other than salary you can negotiate during the salary negotiation.

What does a salary negotiation include?

Many employees and employers perceive salary negotiations as a conversation where the purpose is to award the employee a higher salary. However, this is not always the case, for example you can also negotiate staff benefits or bonus schemes.

Here are 10 things – besides salary – you can negotiate with your employee:

Working hours
Holiday entitlement
Lunch arrangement
Parking
Stock options
Extra days off during the year
Prospects for promotions
Subscriptions to streaming services
Additional health insurance
Memberships for fitness or similar

When must you negotiate salary?

There is no requirement for when your company may negotiate salary with the employee and vice versa. Thus, the individual employee and immediate manager can discuss salary when they think it is relevant.

This can be in the form of a salary negotiation or a conversation in which there is no negotiation, but expectations for the outcome of the salary negotiations between the management and the trade union representative are expressed.

Matters relating to salary can, for example, be included in the performance review. A performance review interview is an employee development interview which, among other things, concerns job satisfaction, job wellbeing and development. If you would like to read more about performance reviews, you can read this article.

What is performance pay?

Performance pay can be agreed locally and is a supplement to the centrally and decentrally agreed salaries. The resulting salary is paid for the relevant measurement period, to the extent that the employee has achieved objectives that have been defined in advance. This type of salary is paid as a oneoff payment, and can, by specific agreement, become pensionable. Read also about:

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Salary negotiation for employers - How to do it