Salary negotiations.....

[Piglet]

Now before some brightspark starts without reading the rest of the post, I'm entirely clear about the economic climate that we are in at the moment...

The firm I work for (professional role) has offered a redepoloyment scheme where it will redeploy those that are interested to parts of the business that are less effected by the economic downturn. From their point of view they avoid the costs and uncertainty of external hires in the receiving departments and they avoid having to run a redundancy programme within my department. Sounds good so far huh?

BUT the salaries that they are offering to those who have offered and been accepted for redeployment are very low. These are balanced in the first year by a compensation scheme but for year two leave those taking the new roles with a significantly lower salary (20% lower in the case of one of my colleagues).

I'm hoping to be offered a role elsewhere, from my point of view it avoids the uncertainty of "will I have a job" over the next 18 months plus I've come to the conclusion that actually I'm not really very happy doing what I do and the opportunity to do something different is quite attractive.

I'm expecting that if I get an offer the salary will be low, I'm then expecting that when I complain about it they will pull out the old chestnut of "we can't move people into a team who are paid signifantly more than other team members" - can someone give me some good, logical rational arguments against this statement? We all know it's rubbish, I know that there are people in my team paid signicantly more than other team members and it's been the same anywhere that I have worked. I'm in danger of rocking in and saying "it's just bks" without being able to put up a convincing counter argument... (it's also likely to be untrue as my current salary will not be significantly higher, a bit higher probably not not hugely)

Help please!

[_Voyager_]

My only argument would be along the lines of my skills, intelligence, experience, judgment and ability will not change so why should my salary. As you eluded to, it kind of depends how big your balls are though.

[Piglet]

Cheers guys....can anyone tell me how much a company pays a recruitment consultant per hire?

[bga]

Piglet said:

Cheers guys....can anyone tell me how much a company pays a recruitment consultant per hire?

At the moment I am getting a few offers (IT) for £1.5k + VAT for someone on £50k

6 months ago it was closer to £5k + VAT for the same. Headhunting is a few factors higher again, but in this climate there are more candidates to choose from in a few industries.

[skwdenyer]

bga said:

Piglet said:

Cheers guys....can anyone tell me how much a company pays a recruitment consultant per hire?

At the moment I am getting a few offers (IT) for £1.5k + VAT for someone on £50k

6 months ago it was closer to £5k + VAT for the same. Headhunting is a few factors higher again, but in this climate there are more candidates to choose from in a few industries.

3% fee for a permanent hire?! Even 10% 6 months ago is pretty poor. When I was recruiting in IT in 1998, we were charging (and getting) 20-25% a hire (we were all doing 2-5 hires per month) on similar salaries, with search assignments (headhunting) being more like 35%. I actually won the "gong" (if you like) for the lowest-ever fees, at 12.5%, but set against that I got half-a-dozen in in one go.

If recruiters are charging that, it implies either (a) that the consultants are getting about £500 a hire, or (b) that the office is being paid-for using credit cards...

[bga]

skwdenyer said:

bga said:

Piglet said:

Cheers guys....can anyone tell me how much a company pays a recruitment consultant per hire?

At the moment I am getting a few offers (IT) for £1.5k + VAT for someone on £50k

6 months ago it was closer to £5k + VAT for the same. Headhunting is a few factors higher again, but in this climate there are more candidates to choose from in a few industries.

3% fee for a permanent hire?! Even 10% 6 months ago is pretty poor. When I was recruiting in IT in 1998, we were charging (and getting) 20-25% a hire (we were all doing 2-5 hires per month) on similar salaries, with search assignments (headhunting) being more like 35%. I actually won the "gong" (if you like) for the lowest-ever fees, at 12.5%, but set against that I got half-a-dozen in in one go.

If recruiters are charging that, it implies either (a) that the consultants are getting about £500 a hire, or (b) that the office is being paid-for using credit cards...

I should qualify this by saying that it's not all of the recruiters who are doing this by any meant, the likes of Madison Black, Huntress, Prime, Swan, Comp Futures are still sending us over CV's and don't really want to negotiate on fees. We are so small that it's not worth their time. They know that we aren't going to pay £12k for someone when we can get the same CV's with a jobserve ad. The smaller firms cut their fees much earlier, our particular market went crap about 12 months ago so there has been a bit of pain for a while for some of those.

[revs88]

Having worked on both sides of the recruitment fence (currently in-house while previously working in both exec. search and agency) - Recruitment fees are still pretty solid even in the current economic climate.

Good recruitment firms with a strong candidate portfolio who are hiring into professional functional areas can still charge healthy fees.

I can still expect to be charged 18%-20% on base salaries up to £40k and 20-25% on salaries above this.
- Potential bonus and car allowance may also be added to the fee calculation but this is typically for senior management/director level posts when using search firms.

Even in a boom time, employers should never pay 35% fees, especially if they are also being charged on bonus, car etc and mandate expenses. If a client is, this probably reflects the impressive sales skills of the consultant rather than the commercial acumen of the client

[skwdenyer]

revs88 said:

Having worked on both sides of the recruitment fence (currently in-house while previously working in both exec. search and agency) - Recruitment fees are still pretty solid even in the current economic climate.

Good recruitment firms with a strong candidate portfolio who are hiring into professional functional areas can still charge healthy fees.

I can still expect to be charged 18%-20% on base salaries up to £40k and 20-25% on salaries above this.
- Potential bonus and car allowance may also be added to the fee calculation but this is typically for senior management/director level posts when using search firms.

Even in a boom time, employers should never pay 35% fees, especially if they are also being charged on bonus, car etc and mandate expenses. If a client is, this probably reflects the impressive sales skills of the consultant rather than the commercial acumen of the client

Agreed. I never charged a percentage of package, only of basic. I actually took my responsibilities (both ethically and legally) to the candidates seriously and figured that, if I took too much of the pot, it would be a disincentive for the client to grant an attractive package.

I also vehemently disagreed with the idea that percentages should go up for higher salaries; at the end of the day, that is as bad as tax laws - a percentage is just that, representing an increasing amount with an increasing underlying figure. Instead I stratified the service, charging a higher percentage for a higher-value service, which any client at any salary level could opt for.

In the end, I wasn't all that comfortable with the fee equation even then, so I left and now, amongst other things, operate a pure research business concentrating purely on candidate generation at fixed prices. Unfortunately, our speciality is the financial sector, which is, err, not awfully healthy right now

[bga]

revs88 said:

Having worked on both sides of the recruitment fence (currently in-house while previously working in both exec. search and agency) - Recruitment fees are still pretty solid even in the current economic climate.

I can only go on what I have seen & been offered. These niche companies must be very worried at the moment because very, very few people in our industry are hiring & their rates are going right down.

[thegreatdogwood]

The bottom line is that you either need to be pragmatic or play the redundancy card. They are effectively making your role redundant and offering an alternative at a lesser salary would not be enough to stop you claiming redundancy if you wanted. As you say, it is a fact of life that companies pay at different levels and all you can do is to seek confirmation that whatever you are offered is consistent with how others are being treated. If the new role is significantly different, you may also be able to agree that you try it for an agreed period. Ultimately you may enjoy the new role, be good at it and end up in a better negotiating position if you show your worth, but avoid if at all posiible agreeing to take a cut / new role without giving yourself the fallback of being able claim redundancy if it does not work for you, as nothing is worse than trying to help out and finding yourself worse off for it.

[skwdenyer]

thegreatdogwood said:

The bottom line is that you either need to be pragmatic or play the redundancy card. They are effectively making your role redundant and offering an alternative at a lesser salary would not be enough to stop you claiming redundancy if you wanted. As you say, it is a fact of life that companies pay at different levels and all you can do is to seek confirmation that whatever you are offered is consistent with how others are being treated. If the new role is significantly different, you may also be able to agree that you try it for an agreed period. Ultimately you may enjoy the new role, be good at it and end up in a better negotiating position if you show your worth, but avoid if at all posiible agreeing to take a cut / new role without giving yourself the fallback of being able claim redundancy if it does not work for you, as nothing is worse than trying to help out and finding yourself worse off for it.

We don't, of course, know what the OP's contract says yet. It is entirely possible that a salary cut is allowable.

Similarly I don't believe the case for redundancy is as clear-cut as you make it out - the OP needs a solicitor IMHO to decide that, in concert with the contract.

[Piglet]

Thanks all...

I've got an interview so I'll know a bit more later in the week.

I'm feeling fairly ballsy about it at the moment as the flip side of a job offer at a lower salary is not necessarily redundancy. If they can't shed enough staff they will have to run a proper redundancy process which as far as I can see they are fairly keen to avoid and given those that have already jumped I'm more confident that I would be retained than I was a month or so ago.

If I take the redeployment there is an ability to take redundancy at a mid point (12 months I think) if I hate it and there is a bung of cash as well as part of the equalisation process.

[skwdenyer]

Piglet said:

Thanks all...

I've got an interview so I'll know a bit more later in the week.

I'm feeling fairly ballsy about it at the moment as the flip side of a job offer at a lower salary is not necessarily redundancy. If they can't shed enough staff they will have to run a proper redundancy process which as far as I can see they are fairly keen to avoid and given those that have already jumped I'm more confident that I would be retained than I was a month or so ago.

If I take the redeployment there is an ability to take redundancy at a mid point (12 months I think) if I hate it and there is a bung of cash as well as part of the equalisation process.

So far it sounds like your employer is being pretty fair about the whole thing TBH given that there is undoubtedly a need to cut headcount and costs.

Also, if you're in a company pension scheme, give some thought to whether you will do better by staying (at a reduced salary, but perhaps negotiate pension contributions to carry on at the previously higher rate) than jumping ship and then having to decide what to do about that pension.

[Piglet]

skwdenyer said:

Piglet said:

Thanks all...

I've got an interview so I'll know a bit more later in the week.

I'm feeling fairly ballsy about it at the moment as the flip side of a job offer at a lower salary is not necessarily redundancy. If they can't shed enough staff they will have to run a proper redundancy process which as far as I can see they are fairly keen to avoid and given those that have already jumped I'm more confident that I would be retained than I was a month or so ago.

If I take the redeployment there is an ability to take redundancy at a mid point (12 months I think) if I hate it and there is a bung of cash as well as part of the equalisation process.

So far it sounds like your employer is being pretty fair about the whole thing TBH given that there is undoubtedly a need to cut headcount and costs.

Absolutely, I've been pretty impressed and if it wasn't for the low salary offers that have been banded around I'd be quite happy.

I've worked for plenty of other places where in this climate we'd have been out on the street weeks ago...

Thanks for the pension suggestion, that might be worth some thought.

[thegreatdogwood]

skwdenyer said:

We don't, of course, know what the OP's contract says yet. It is entirely possible that a salary cut is allowable.

Similarly I don't believe the case for redundancy is as clear-cut as you make it out - the OP needs a solicitor IMHO to decide that, in concert with the contract.

Citizens Advice Bureau is the cheap way to go initially. Very unlikely to have a clause in an employment contract that allows unilateral salary reduction and even then you can contest it as being an unfair term of contract under current law. Just trying to alert him to the fact that you do have options when put in that position and do need to weigh up your prioritites before choosing which route to explore.

[skwdenyer]

thegreatdogwood said:

skwdenyer said:

We don't, of course, know what the OP's contract says yet. It is entirely possible that a salary cut is allowable.

Similarly I don't believe the case for redundancy is as clear-cut as you make it out - the OP needs a solicitor IMHO to decide that, in concert with the contract.

Citizens Advice Bureau is the cheap way to go initially. Very unlikely to have a clause in an employment contract that allows unilateral salary reduction and even then you can contest it as being an unfair term of contract under current law. Just trying to alert him to the fact that you do have options when put in that position and do need to weigh up your prioritites before choosing which route to explore.

Agree entirely. But I don't think there's anything intrinsically unfair about a contract term allowing a salary reduction, particularly if salary level is factored in the contract relative to company performance. It wouldn't be a particularly standard term (historically, at least) but there's no reason why it shouldn't be there.

I've certainly had a contract that allowed my employer to put my salary down as well as up, in response to certain criteria (personal performance being one of them, company performance being another).

What piece of legislation do you think makes this explicitly "unfair".

[thegreatdogwood]

skwdenyer said:

Agree entirely. But I don't think there's anything intrinsically unfair about a contract term allowing a salary reduction, particularly if salary level is factored in the contract relative to company performance. It wouldn't be a particularly standard term (historically, at least) but there's no reason why it shouldn't be there.

I've certainly had a contract that allowed my employer to put my salary down as well as up, in response to certain criteria (personal performance being one of them, company performance being another).

What piece of legislation do you think makes this explicitly "unfair".

Agree you need to separate out the base and performance related elements. It would be unusual to have a variable base, merely to have a base salary with top up for performance against established criteria (including company performance). The inference here is that job would be changed to a different role and that remuneration would be reduced, not merely that bonus would be reduced (which would of course happen under most such circumstances and generally be considered manifestly fair) A significant variation in role / reduction in base earnings is likely to constitute constructive dismissal and employee can generally push for / achieve redundnacy to avoid costly tribunal proceedings. To have a contract which is sufficiently flexible to allow unilateral variation (i.e does not set out parameters) does not comply with the Employment Act 2002, as with all contracts you need sufficient clarity to be able to guage whether each party has complied. There is also a pending House of Lords case as to whether 1977 Unfair Terms of Contract Act extends to employment law. Not a pleasant area of law.

[skwdenyer]

thegreatdogwood said:

skwdenyer said:

Agree entirely. But I don't think there's anything intrinsically unfair about a contract term allowing a salary reduction, particularly if salary level is factored in the contract relative to company performance. It wouldn't be a particularly standard term (historically, at least) but there's no reason why it shouldn't be there.

I've certainly had a contract that allowed my employer to put my salary down as well as up, in response to certain criteria (personal performance being one of them, company performance being another).

What piece of legislation do you think makes this explicitly "unfair".

Agree you need to separate out the base and performance related elements. It would be unusual to have a variable base, merely to have a base salary with top up for performance against established criteria (including company performance). The inference here is that job would be changed to a different role and that remuneration would be reduced, not merely that bonus would be reduced (which would of course happen under most such circumstances and generally be considered manifestly fair) A significant variation in role / reduction in base earnings is likely to constitute constructive dismissal and employee can generally push for / achieve redundnacy to avoid costly tribunal proceedings. To have a contract which is sufficiently flexible to allow unilateral variation (i.e does not set out parameters) does not comply with the Employment Act 2002, as with all contracts you need sufficient clarity to be able to guage whether each party has complied. There is also a pending House of Lords case as to whether 1977 Unfair Terms of Contract Act extends to employment law. Not a pleasant area of law.

Thank you. As ever, the law stitches up everybody in red tape Are we really not allowed to have "your job is XYZ and whatever other duties as the employer shall reasonably request" any longer? Certainly my variable-base contract was written in 1998, so it pre-dates EA2002 by a little while.

I realise there is a supposed advantage for 5 or 6 people in these rules, but surely we should be encouraging flexible working patterns negotiated between adults, so that we spend more time keeping businesses afloat and a little less time worrying about employment tribunals.

/soapbox

As regards the Unfair Terms in Consumer Contracts regulations, that's quite interesting. Having studied that legislation in some detail, it would be, err, a bit of a stretch to say that it applied to employment contracts! Furthermore, that would surely only apply to collective bargaining agreements, since most other jobs are subject to negotiation on contract terms.