Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. Salary is paid, most frequently, in a bi-weekly paycheck to an exempt or professional employee. In most years, an employee's salary is paid in 26 even paychecks over the course of the year.
An employee who is paid a salary is expected to complete a whole job in return for the salary. A whole job that an employee is accountable for accomplishing is understood by the employee from the job description, the title of the position, and the goals set by or negotiated with the employee's manager.
This is different from a non-exempt employee who is paid an hourly rate or by the piece produced. A non-exempt employee is not responsible for a whole job and may produce only a part of an overall product, for example, on an assembly line. This employee is also generally eligible to collect overtime pay when he or she works more than the requisite number of hours in the day.
The salaried employee or employee who is paid by salary does not track hours worked and is not paid for overtime pay. (Some public sector, often union represented, employees expect to account for hours and collect compensatory time off. This is not the norm in the private sector.)
Because of Fair Labor Standards Act (FLSA) rules about overtime payment, employers are required to closely track the hours and partial hours worked by non-exempt or hourly employees.
Salary is determined by market pay rates for people doing similar work in similar industries in the same region. Salary is also determined by the pay rates and salary ranges established by an individual employer. Salary is also affected by the number of people available to perform the specific job in the employer's employment locale.
Salary requirements are the amount of money that a job searcher has decided that you need to offer for him to accept your job offer. The fixed expenses that the candidate has incurred by his lifestyle choices drive this required amount of money. Unfortunately, some candidates have unrealistic expectations of what type of salary their skills will bring.
These fixed expenses, including items such as mortgage, car payments, children's school, taxes, and utilities, are what an employee bases her requirements around. The requirement may have no relationship to what the market rate is.
Unless a job searcher is desperate for any employment, he will not accept a position that doesn't cover his expenses. If he does accept your position for less than his realistic salary requirements, you can count on the fact that he will continue job searching—secretly. If his salary requirements were unrealistic, he'll keep searching as well, but he won't find anything. If your pay is at the market rate, he'll learn that is the case.
Asking Applicants to Disclose Salary Requirements
This is why employers ask applicants to provide their salary requirements at the time of their job application. If salary requirements are too far apart, it's a waste of time to conduct interviews with a candidate who will never accept the job.
If a candidate is currently employed, they have little reason to take a cut in pay. If the candidate is unemployed, the employer may have more wiggle room in getting the person to accept a lower salary.
The employer knows that pursuing a candidate whose salary requirements are higher than the salary range he plans to pay the employee is a waste of time and energy. Nevertheless, many companies refuse to disclose their salary ranges to job candidates. Many job candidates don't wish to state an expected salary for fear that they will inadvertently low-ball themselves.
However, an applicant who fails to answer the prospective employer's question about his salary requirements risks having his application not considered. While job candidates believe that the first party to talk numbers is at a disadvantage in a salary negotiation, the employer has legitimate reasons for not wanting to consider candidates they can't afford.
Many employers feel that if they disclose their ranges, candidates will assume they deserve the top of the range. Additionally, they don't want to pay more than they have to and can base their offer on the candidate's stated desire, rather than the true market rate.
Create Market-Driven, Realistic Salary Ranges
Good employers go to great lengths to understand and create salary ranges that are competitive in the employment market. They want to attract and retain superior employees, and they know that the prospective employee's salary requirements drive employment decisions.
They won't give a candidate a low offer, even if the candidate has made it clear that they are willing to accept an offer that is below market rate. If the employee finds out that they are worth more than the employer is paying, morale will drop and the employee will look to leave as soon as possible. Turnover is expensive, so saving a few dollars by paying below market rate can backfire.
Participating in salary market surveys to create a trustworthy resource for salary research has become critical to understand the salary requirements of qualified applicants for jobs. Currently, salary research is escalating with online resources such as salary calculators making salaries easier to pinpoint and understand. It also makes it easier for candidates to find out market values, decreasing the information asymmetry that often plagues salary negotiations.
When an employer makes a salary offer to a prospective employee, many candidates will attempt to negotiate a higher salary. Whether or not you negotiate at this point is up to you, but negotiation is a common aspect of reaching an agreeable salary, so the employer needs to negotiate. Otherwise, your best candidate may just walk away.