Compensation is the cash reward paid to employees in exchange for the work they provide. This may include salary, wage, incentives and benefits.
Discussions around compensation can be a touchy subject during the interview process, and something that job seekers are confused and nervous about. Job seekers are often in the dark as to what a realistic salary expectation is, and what rate they should try to negotiate for, during the interviewing process.
To add to this, job seekers often believe they are not paid their worth, which causes even more frustration and anxiety around compensation discussions. According to data released by compensation website PayScale, only 36 percent of professionals believe they are paid fairly.
What job seekers need to keep in mind though, is that it is very difficult to identify exactly what salary should be paid for each career, as there are so many factors that can affect salaries, and salaries can vary tremendously even within the same occupation. Regardless as to how highly job seekers price themselves based on their skill set and educational qualifications, there are outside factors that are going to govern what their compensation will be.
Job seekers tend to think that the main criteria when looking at salary is obviously around experience, skill level and educational qualifications. Yes these factors are critical, but there are a number of other less obvious factors that also affect compensation tremendously.
Related market conditions and trends
Salaries can be affected tremendously by what is happening in the market. When times are good, companies often pay higher salaries, when times are bad, and there is a lot of uncertainty in the market, companies tend to tighten their purse strings and salaries are often not nearly as competitive.
Geographic location and cost of living
Geographic location is one of the biggest factors when determining salary. Where in the world the company is based and the related cost of living index, can affect salaries tremendously. An example being that a Mining Engineer working in Australia may earn substantially more than one working in the USA, because the cost of living in Australia is so much higher.
Ability to pay
Prosperous companies are in a better position to consider a higher salary than a company that is not doing so well. What one company may be able to afford and be willing to pay for a particular skill, can vary tremendously to what another company may be able to afford.
Availability of skills
Supply and demand play a critical role in what salary may be offered. If there is a skill that is in huge demand, salaries can climb very quickly as the company will be competing with other companies in order to fill the role. When there is an oversupply of a skill the opposite happens and salaries can go down.
Ones negotiating skills can affect a job seekers salary tremendously. Employers as a rule will have a set range they are prepared to pay in, but if the job seeker is a skilled negotiator they are often able to negotiate themselves a far higher salary than somebody who is not.
Depending on where the job is based there may be government legislations in place that have a massive impact on salaries paid by employees. In many areas salaries cannot be fixed below the prescribed level that government has created.
Labor unions can affect salaries offered tremendously depending on where in the world the job would be based. The labor unions aim is often to use their influence to demand a higher wage, they are also involved in regulating the supply of labor which affects salaries paid.
The old saying goes “money does not buy happiness” this is all very well, yet the reality is that without money life can be very hard. For this reason job seekers need to be educated and realistic with regards to salaries and to ensure they do not sell themselves short, or price themselves out of the market, whilst ensuring they negotiate themselves the best deal possible.