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 I just made an employment offer to an entry level professional (i.e. recent college grad).

We base our offers on experience levels and education  on a scale within our organization so that people ultimately get paid based on performance. but for new hires, performance is often an unknown, especially for hires with no experience.  Therefore, we pretty much scale the offer to just education and experience. This gives us the flexibility to increase pay quickly for outstanding performers.

The candidate has now come back with a counter offer because he needs full family health coverage which is mostly an employee paid benefit.  I am disinclined to entertain negotiations for several reasons: 

1. Why should he be compensated more solely because he has a family needing health insurance?  In looking at total compensation, his counter is a 12.5% increase over the norm.

2. He is an unknown who will require significant training resources over several years to become truly productive.  

3. I don't see an employment offer as a negotiation process. I could understand if he wanted more pay and in return was willing to accept less in other benefits. But this seems one sided.  I wouldn't negotiate with clients this way, why should I with a potential employee?

Thoughts?  This has left me with a bad taste to the extent that I am almost considering withdrawing the offer.  I realize that is hasty and unwarranted but am looking for MT guidance.

 

 

 

PaulChan's picture

An offer of employment is a negotiation. The company is offering to enter into a contract where the employee provides their labour, skills, knowledge, and experience in return for payment. As such, it is reasonable for a prospective employee to make a counter offer. You don't have to accept it though.

You may view his counter-offer as unreasonable and/or not want to break with pay scales given to others in the same situation, for fear of setting a precedent. Your reasoning (points 1 and 2) make sense, so decline his counter offer and reassert your original offer. If he chooses not to accept, you both go your separate ways. End of story.

 

 

JonathanGiglio's picture

Remember, there are still options out there for talented individuals. You may competing against other companies willing to offer this individual employment with benefits. It is disheartening to think that insurance would stand in the way of hiring a qualified candidate considering how big the labor pool is right now.

What is his value to the organization? What are his risks in accepting the offer or waiting for a company with insurance? What are your risks in not hiring him and hiring someone who doesn't need insurance?

Can you counter with lower salary and pay his insurance? Some people want more vacation, some people want to work from home. Insurance is important to a lot of people, especially those with families. 

What is your company's insurance policy for employees?

While the company views insurance the same way it views salary (it all hits the bottom line), most employees do not. Consider the human and relationship value in making insurance a part of his compensation package and try not to look too deeply into his negotiating for such a reasonable consideration.

 

mtietel's picture

 Negotiation is give and take, not take and take.

Paraphrasing Mark: what is he offering in return?  That he's going to work 12.5% harder than without the pay/benefit increase?

I had an intern one summer.  The next year she wanted a larger pay increase because she had a new car.  Not a good justification that addressed any business need of mine.  The standard offer was re-asserted.  She didn't work for me that year.

RichRuh's picture

Namillercpa,

I agree with the point you raised in #3.  While I wouldn't withdraw the offer myself, I would just reiterate what you said earlier in your message:  "This gives us the flexibility to increase pay quickly for outstanding performers."

If your compensation (salary+benefits) is not competitive, than you have a different problem.

 

JonathanGiglio's picture

He just might work 12.5% less. I'm sure the distraction of being without insurance will cause an otherwise mitigatable hindrance to performance. There are plenty of worries for an individual within the workplace and having to consider alternate employment due to medical coverage will weigh on the minds of this individual.

Personally, I would not put the salary productivity that I am willing to compensate this individual at risk because I think this person should be on his own with regards to medical costs.

The obvious caveat here is the requirements to get someone onto and off of the corporate insurance plan. Is there a waiting period? Are you obligated to the employee if he doesn't work out? Can he get onto the plan after 90 days? Are the HR hoops onerous (although I wouldn't let this stop you)?

acao162's picture

I can see your point.  Here you have an unknown person who you've liked well enough to make an offer to.  I agree that a counter-offer is distasteful.  Part of me wonders how the counter offer was made -  was it a "I'll come, but only with full benefits" or "would the company agree to full benefits in addition to the salary"?  A new grad may have bought into the idea that "salaries are a negotiation process".

If it is the latter, you have the ability to say no and maybe still get the candidate.  Is this something typically offered to new hires?  In my org, full benefits don't start for 90 days unless management agrees to waive the waiting period.  We *never* have and haven't lost anyone over it.  Essentially my thought is - do you want to work here, or not?

If you have to say no to the benefits, when would it turn into a yes?  That may make a difference, depending on the family situation also. 

The one thing you didn't mention was if you had a strong second choice candidate?  Something to think about.

tomjedrz's picture

First of all, I would get over the "bad taste". Somehow you are taking the process personally, when you have made quite clear that it is highly impersonal on your side. The candidate asked for something he wants.  Good for him .. those unwilling to ask for what they want rarely get it. I like assertiveness in subordinates, and tend to reward it.

Your choices (as I see it) are:

  1. Agree to his counter. This assumes you have the money, which is reasonable since you didn't mention otherwise.
  2. Reject his counter and re-assert the original offer.
  3. Reject his counter and withdraw the offer. 
  4. Counter back somewhere in the middle, perhaps with non-salary items

My inclination is to accept his counter, making clear that because of hard pay-scale limits his future increases will be small (or zero) until he crosses pay scale boundaries. It sounds like you are inclined to reject the counter and re-assert the original offer, which is also a valid and reasonable choice in a company with well-defined pay scales. 

Countering somewhere in the middle is an attractive option to some, but not to me. I don't like to present the idea to subordinates that things are negotiable, because most things aren't. I would only do this if I could find some way to meet his need beyond  the salary. It is also the path most likely to lead to bad feelings, because it is becoming personal rather than a function of the bureaucracy.

Withdrawing the offer is silly, unless he demonstrated some bad quality (arrogance, etc.) in making the counter. But if that had happened you wouldn't have asked the question because the course would have been clear.

A couple more things you should be aware of ...

  • an alternate interpretation of "we want the flexibility to increase pay for good performers" is "we under pay drones until they demonstrate they are worth keeping." My experience with public accounting and consulting leans to the latter interpretation. The candidate likely thinks the same thing.
  • some job seekers are advised to press for the highest salary possible, because most performance appraisal schemes set increases as a percentage of salary, so taking a lower salary limits future increases.
  • some job seekers are told not to accept the first offer because it shows desperation and weakness.
tomjedrz's picture

Negotiation is absolutely appropriate in a job offer situation. Our hosts don't recommend it, primarily (as I understand it) because negotiating after the offer is high risk (losing the position) and low return (a few %), not because it is improper or inappropriate. Your response to the counter illustrates the risk. 

I was particularly struck by the comment  "I wouldn't negotiate with clients this way, why should I with a potential employee?"

I am surprised that you don't negotiate with potential clients. If a potential client asks for a lower rate (or other concessions), do you withdraw the proposal?  Do you continue the discussion and attempt to win the business? Or do you tell them "this is our proposal and we are sticking with it."

ashdenver's picture

1. Why should he be compensated more solely because he has a family needing health insurance?  In looking at total compensation, his counter is a 12.5% increase over the norm.  He shouldn't.  Not in my opinion.  Benefit packages (including salary) are offered based on the company's perspective - what value does the position have within the organization, what value does the offered candidate bring to the table to benefit the company, what is the position worth in the open market, etc.  His personal circumstances are irrelevant from the 35,000 foot view but from the 50,000 foot view, he's told you why he's pushing for insurance.

2. He is an unknown who will require significant training resources over several years to become truly productive.  At some point, you decided this person was The One - qualified, worthwhile risk, planning to devote those resources to him.  His request for the addition of insurance is completely irrelevant to the question of training resources.  You already commited to that as you drafted the offer letter.  That has no bearing whatsoever on the question of insurance.  What you're faced with is taking on additional compensation costs to hire this person.  Perhaps instead of looking at it as "he wants insurance cuz he has a family but I won't get ROI on that for a long time" view it instead as "In what circumstances would I be willing to issue an offer letter which is 12.5% higher than the norm" and "does this candidate qualify under that scenario?"

3. I don't see an employment offer as a negotiation process. I could understand if he wanted more pay and in return was willing to accept less in other benefits. But this seems one sided.  I wouldn't negotiate with clients this way, why should I with a potential employee?  Some things are negotiation-free ... like buying a suit.  The price is the price is the price.  Some things are open to negotiation ... like buying a house or a car - or agreeing to an employment relationship.  The price is there but it depends on market conditions as to what the final price ends up being - is it a seller's or buyer's market?  In this case, it's clearly a buyer's (employer's) market with 1 out of 9 Americans out of work or underemployed.  (In 1934, it was 1 out of 6.)  But that doesn't mean that negotion is out of the question - unless you arbitrarily decide that it is. 

A couple of additional thoughts come to mind:

A.) You could hold firm to the original offer and probably still land the person as an employee but this will always be a sticking point for him and it will never leave his mind that the way your company treated him from before Day One was "cheap" (in a word.)  He may never get over being thought of as worth less than he thinks he's worth and may jump ship at the first opportunity, taking with him the years of training resources you're already planning to invest in him.

B.) You could cave completely and give him the 12.5% worth of insurance which would likely make him grateful and thrilled to be working for a great, compassionate and brilliant company (that recognizes & appreciates his full worth, as defined by his counter-offer.)  Starting the employment relationship on this footing will likely "buy" some loyalty from him as an employee, thus allowing you to achieve the ROI on the training resources you're planning to invest.  But, as with most things, there is no guarantee of this and I doubt you're willing to engage in a genuine Employment Contract complete with buy-out terms to better ensure you get X amount of years of productivity out of him in exchange for the early insurance being provided.

C.) You could check with HR / Benefits Administration to see if there is a way to structure something special.  Maybe instead of waiting X amount of days and then paying 15% of the carrier-billed premium (like $150 per month of the billed $1,000), the employee would pay 85% of the carrier-billed premium ($850 per month of the billed $1,000) from Day One until X amount of days has been reached, at which point he would revert to the traditional 15%.  This sort of arrangement would fulfill the candidates needs for safety & security (through the insurance coverage) while limiting the dreaded 12.5% figure and further limiting the company's financial risk in taking on someone with limited experience.  If insurance is truly that important to him and he really wants to work for your company, the added premium costs would still be significantly less than he would have to pay on his own for much less substantial coverage. 

Having been the HR / Benefits Administration person for a significant portion of my career, I will say that I'd probably groan and roll my eyes if you asked me something like that simply because any exception to the programmed "rules" can cause a significant amount of setup & administration, however, an HR person worth their salt would willingly do it because, strategically-speaking, we know it's paramount to the company's profitability and longevity to snatch up the best talent we can find, whatever it takes (within reason.)  

If you go the route of C.) I would provide a new offer letter outlining what is being offered, including the 85% rates for all of the benefit plan options out there (if you have four coverage levels on an HMO and a PPO, you need to provide "here's what each of those 8 choices would cost for the first X amount of days") as well as the date upon which the employee's medical/dental/etc. would revert to the standard coverage rates proscribed in the Employee Handbook (also listing those out for every coverage level, along with the caveat that these rates are subject to carrier increases which may be applied throughout the company during that timeframe.)

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ashdenver's picture

I missed this the first time: he needs full family health coverage which is mostly an employee paid benefit.  

If it's mostly an employEE-paid benefit, what's the big deal?  In that case, and assuming it truly is mostly employEE-paid (like 95% EE, 5% ER) I would say you'd be silly NOT to go with C.) and put it to 100% employee paid for that period in which case there is zero impact to the company.  

If that was a typo and it's mostly an employER-paid benefit, then yeah, if you go with C.) you'd have to structure it in a way that the brunt (or even all) of the costs are paid by the employee.   

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