Decoding How Companies Arrive At Salary Offers

By Jeff Altman, The Big Game Hunter

Salary negotiations can be stressful for job seekers. When you receive an offer, you naturally want to understand how and why the company came up with that particular number. Asking the right questions can provide valuable context and information to help you respond.

What factors do companies consider?

Several elements come into play when determining salary offers:

Market rate — Companies review competitive salary data to see what similar roles at other organizations pay. This provides a baseline for calibrating their own ranges. Resources like PayScale, Salary.com, and trade associations give benchmarking information.

Internal alignment — Salaries for the same or comparable positions within the organization are analyzed to ensure consistency. Large discrepancies between employees with similar experience and duties can lead to retention issues.

Budget — Each department is allocated a certain budget for compensation. Offers must align with what is fiscally possible and approved by leadership. Budgets are usually set annually.

Candidate background — Your specific skills, qualifications, experience and education factor into the offer. Roles requiring highly…