Employers: Making a Higher Offer May Save You MoneyMGR Accounting Recruiters in
As an employer myself, I realize this advice may be counter-intuitive. It would seem that getting a qualified employee for the most reasonable salary possible would help your business be more profitable in the long run.
However, being a recruiter for over 20 years and having been through several tight labor markets, I have learned that the opposite is usually true. Making the best (fair) offer possible usually saves you money in the long run. Some of the reasons include:
- Lower risk of a declined offer. Typically when we as employers look at the ‘cost’ of an employee, we tend to consider their annualized salary as a whole. However, another meaningful comparison to consider is the incremental difference between what we are paying versus the median market salary. When you consider this incremental cost of employment, you will likely realize that it pales in comparison to the value you gain by securing your top-choice candidate. In addition, the production you lose by not having the position filled for a longer period of time also frequently outweighs the incremental cost of hiring at a slightly higher salary.
- Lower chances of a counter-offer. If you are only offering slightly more than the person is making in their current job, you make it easier for the current employer to make an acceptable counter-offer. Plus, you increase the chances of the candidate accepting the counter-offer. A candidate that feels you believe in them and are showing it by making an impressive offer is less likely to stay with their current employer. However, a candidate that feels you are making the lowest offer you think they will accept may feel like they are being taken advantage of, even if they accept. This leaves the current employer with a greater chance of being able to convince the employee to stay.
- Lower chances of losing to a competitor. In a tight labor market, it’s common for a candidate to be interviewing for many positions. It’s also more likely that another employer may speed up their process instead of risking losing their only top-candidate. Making an impressive offer increases the chances that the candidate will cease other interview processes and accept, while a less-than-impressive offer generally causes a candidate to wait so they can weigh all their options before making a decision.
Making the best offer possible may seem like an expensive choice; however, when the benefits are compared to the incremental costs, it’s usually the best choice for the long-term success of your business.
I wish you the best in your hiring efforts.
Mark Goldman CPA