New Feature: Playlist Center! Pick a topic and let our playlists guide the way.

Easy-to-follow video tutorials help you learn software, creative, and business skills.Become a member

Understanding how employers determine salary

From: Negotiating Your Salary

Video: Understanding how employers determine salary

You know understanding your worth to the market is the first step to successful negotiations. Knowing how salary ranges are determined will help you to understand how to best negotiate. Many organizations have a compensation policy that sets rules for how employees will be paid, how salary reviews are handled, as well as how the company will calculate bonuses. Employers determine this policy based on three considerations. The first consideration you may think of is individual equity.

Understanding how employers determine salary

You know understanding your worth to the market is the first step to successful negotiations. Knowing how salary ranges are determined will help you to understand how to best negotiate. Many organizations have a compensation policy that sets rules for how employees will be paid, how salary reviews are handled, as well as how the company will calculate bonuses. Employers determine this policy based on three considerations. The first consideration you may think of is individual equity.

This is based on your unique talents and potential as an individual. Individual equity is where your advantage lies in the negotiation process, which we will cover later in this course. You have to remember though, it is not what you think you're worth, but what the employer thinks the job position is worth. Which is why we need to look at two other considerations. The second consideration is internal equity, which looks inside the company. It is a measure of how your salary compares to others within the same company.

So someone else in the company is making $50,000 for the job you want, then the company expects to pay you something close to $50,000. Likewise, a company will pay a senior level person more than a junior level person. Internal equity is important as you will need to understand where you fit into the organization's hierarchy. Third, external equity looks outside of the company. So if company A is paying graphic designer $60,000, then company B is probably going to pay something close to $60,000 for graphic designers.

However an organization can choose to pay higher or lower for various reasons including their geographic region, industry, or how attractive they wish to be to potential employees. Based on all three equities, human resources will generally make an offer from their low range to their mid range for potential employees. This gives them room to offer raises and allows you to grow as an employee. The first place to start your research is with external equity, since companies will be benchmarking against this.

In the next video, we'll discuss the methods for determining the salary range for your role and industry.

Show transcript

This video is part of

Image for Negotiating Your Salary
Negotiating Your Salary

16 video lessons · 11088 viewers

Valerie Sutton
Author

 

Start learning today

Get unlimited access to all courses for just $25/month.

Become a member
Sometimes @lynda teaches me how to use a program and sometimes Lynda.com changes my life forever. @JosefShutter
@lynda lynda.com is an absolute life saver when it comes to learning todays software. Definitely recommend it! #higherlearning @Michael_Caraway
@lynda The best thing online! Your database of courses is great! To the mark and very helpful. Thanks! @ru22more
Got to create something yesterday I never thought I could do. #thanks @lynda @Ngventurella
I really do love @lynda as a learning platform. Never stop learning and developing, it’s probably our greatest gift as a species! @soundslikedavid
@lynda just subscribed to lynda.com all I can say its brilliant join now trust me @ButchSamurai
@lynda is an awesome resource. The membership is priceless if you take advantage of it. @diabetic_techie
One of the best decision I made this year. Buy a 1yr subscription to @lynda @cybercaptive
guys lynda.com (@lynda) is the best. So far I’ve learned Java, principles of OO programming, and now learning about MS project @lucasmitchell
Signed back up to @lynda dot com. I’ve missed it!! Proper geeking out right now! #timetolearn #geek @JayGodbold

Are you sure you want to delete this note?

No

Thanks for signing up.

We’ll send you a confirmation email shortly.


Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

Keep up with news, tips, and latest courses with emails from lynda.com.

Sign up and receive emails about lynda.com and our online training library:

Here’s our privacy policy with more details about how we handle your information.

   
submit Lightbox submit clicked
Terms and conditions of use

We've updated our terms and conditions (now called terms of service).Go
Review and accept our updated terms of service.