Negotiating pay rates with your organization’s contracted resources can be one of the most daunting aspects of your hiring program, but it’s also one of the most important.
When beginning negotiation discussions, your organization needs to enter the conversation prepared with knowledge and best practices that ensure a fair, market-based contract rate that’s mutually beneficial to both parties.
Below is an easy-to-follow, actionable plan that will align your directly sourced workforce with your cost saving objectives.
1. Prepare with research
Use your hiring data to establish benchmarks on what you pay for specific roles. If you already have a rate card, even better. Use it and compare it against your hiring results, paying particular attention to the use of “niche” or “other” worker types. If you are using these types of workers, dig in to find out why. This usually means that someone is working around rate compliance, you need to add a new category or you should review your existing rate card to current market conditions.
Approaching the bargaining table prepared with a framework for dialogue will improve the chances of achieving mutually beneficial relationships with your contingent workforce. Harvard Law School’s Program on Negotiation recently released a free Negotiation Preparation Worksheet to help you create that framework. You can download your copy here.
2. It’s not all about the money! Consider unique candidate motivators
When beginning negotiations, it’s important to put the people first and the numbers second. However, you don’t want to reveal your budget too soon, as once you’ve anchored a number, it’s hard to move away from it. Instead, get an understanding of what’s important to your candidate by asking yourself, “What do they hope to gain out of the role and where is the balance between what they’re looking for and the expected rate?”
Compensation packages that include things like vacation days and health benefits may only be available for full-time employees, so it’s important to consider creating unique compensation packages that include non-monetary drivers like remote work options, a flexible work schedule, exciting project work or the use of new technologies.
A recent Procom survey of 3,000 contingent workers found 29% agreed career growth is their #1 motivator when choosing contract work. The opportunity to work with cutting edge tools and on the job training with trending technologies is an attractive motivator for these contingent workers who want to increase their marketability in the workforce.
3. Maintain candidate control with full disclosure
Transparency is critical to setting clear expectations frequently and early in the negotiation discussions, and you’ll want to set these parameters as soon as possible to save both parties time and frustration.
It’s important to be transparent things like:
- Background checks
- Compensation packages
- Deliverable time frames
- Device policies
- Chances for extensions
- Flexibility on work from home options
Setting clear expectations about conducting background checks, required must have skills and specific program requirements will mitigate candidate confusion on things like why you’re conducting a credit check, why a worker can or cannot use their own laptop or why he or she can or cannot work remotely between 9-5.
You’ll also want to be aware of things like your hiring time frames. Did you communicate that you need a resource ASAP, but have plans to leave on vacation for two weeks? Errors like these will leave the candidate on radio silence when he or she was expecting immediate feedback.
Surprises leave candidates dissatisfied about the process, creating an opportunity for a dissatisfied worker to gain a negative perception of your organization, which will affect your brand’s reputation. When 11% of candidates won’t accept a position with a company that has a bad reputation, avoiding surprises in the hiring phase is crucial to attracting talented candidates.
4. Be prepared to haggle!
Starting hourly rates can change rapidly, especially for high-demand or niche roles. If you’ve found a gap in the rate data you’ve gathered and your budget, make adjustments if you can. Just because you paid a certain number for the same role in the past, it doesn’t mean you will still find talent at that price. If your organization is not prepared to present a competitive offer, you may wind up with your second or third choice instead of your first.
5. Take emotion out of the equation
Negotiations are professional conversations, and how you handle yours will make a direct impact on your personal brand and that of your organization. To protect the reputation of both, it’s important to remember to stay calm and not let inflexibility based on pride or emotion control the conversation. Discussing compensation can become personal and emotional, but it’s important to never burn bridges!
An effective recruitment process will always leave the door open for future opportunities, ensuring an organization has continuous access to qualified candidates and isn’t putting all its eggs in one basket.
6. Track your results and keep your eyes open!
We’ve all heard the saying that if you can’t measure it, you can’t manage it. This is no exception. Make sure you track your hiring and the results of the negotiation efforts. What are you finding? Are there certain hiring managers that are less compliant? Are there specific roles that you have less success negotiating with? This is powerful information for your contingent worker program.
You’ll also want to consider job inflation and vanity titles, and be weary of those who attempt to negotiate a rate they aren’t actually qualified for. Although a part of the hiring process is performing thorough due diligence on every candidate, remember that job titles don’t always represent a candidate’s actual skill set, or experience.
7. Keep your rate card updated
It’s important to keep your contractor pay rate card updated every 2-3 years and be reflective of the hot or cold market, as this is the benchmark for your negotiating efforts. While there are cost savings to be had in an employer market, you need to be prepared to act when the market heats up overall, or for a new skill, and ensure your program is adaptive to these changes.
It’s also important to remember that candidates who possess a core technology plus a niche skill should not be priced in the same bucket as a candidate who only possesses the core technology alone. Remember, niche or upcoming skills will be priced higher in the market, and your rate card should not limit this.
How can you tell if your rate card needs updating?
- Increased number turn downs (by the consultant) for competing offers
- Repeated requests by consultants for pay rates above the max market rate
- Increased challenges in sourcing qualified candidates
- Increased demand for the talent you are sourcing
- Contract extensions where current rate exceeds previous market rate
- Experiencing a higher percentage in asks for rate increase at extension
- Extensions not being accepted in favour of a better offer outside of your organization
When you put out the roles but your candidates are coming in over rate card consistently on a particular category or overall it is worth reviewing. It is good to put an eye on your rates yearly to look at roles that are coming in above rate card and those that you consistently see below. A comprehensive review every 2-3 years is advised as this allows you to consolidate, remove or add new role categories that may deem to be necessary especially as your internal roles/needs change.
Building a strong negotiation plan and sticking to it can be as easy or as difficult as you make it. However, the right partner could also help give you access to the right skills when you need them. Is your organization looking to build an effective direct sourcing program or find ways to make the existing program more effective?