FAQs On Desired Compensation (Plus How To Calculate It)

Updated 15 October 2022

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Hiring managers often ask candidates about their desired salary during a job interview. While sharing an amount that is too high could affect whether you get the job, naming an amount that is too low could also impact your ability to sustain a comfortable lifestyle. Knowing how to provide a salary value in an acceptable range can help you earn fair compensation based on your skills and experience. In this article, we answer frequently asked questions about desired compensation so that you can provide a reasonable answer to a prospective employer during the job interview.

What Is Desired Compensation?

Desired compensation is the salary and benefits you receive from an employer for performing a specific job. It includes cash compensation and other non-monetary benefits like equity options and parental leave. Employers often discuss a prospective employee's desired salary, bonuses and benefits as part of the hiring process. The salary can be hourly, weekly or monthly, depending on the type of role. Apart from the basic income, companies often convince candidates to join their team by providing other non-monetary benefits like:

Health and life insurance
Home rent and travel allowance
Paid time off for sick days, vacations and holidays
Retirement plans
Tuition reimbursement
Stock options
Relocation assistance
Gym membership
Home office setup costs

Why Do Employers Ask For A Desired Salary?

Here are a few reasons why hiring managers or recruiters ask for your desired salary during the interview or on the job application:

They want to ensure they have the budget to hire you. Knowing your salary expectations helps employers determine whether they can afford to hire you. If your desired salary is slightly above the norm, they might work on optimising their budget to hire you at your desired salary.
They want to check that your priorities match that of the organisation. Startups and bootstrapped companies might prefer to hire motivated employees who fit the organisation's mission. Asking the desired salary helps them eliminate candidates solely incentivised by the pay.
They are interested in hiring candidates of suitable seniority. By understanding your desired salary, companies can better evaluate if they are hiring candidates with the right experience. For example, if they are looking to hire for a junior role but your desired salary aligns with a senior position, they can clear up the misconception during the early stages of the interview.
It provides them with an opportunity to negotiate. For example, if you share a salary range at the higher end of the company's available budget, they can try negotiating by including other non-monetary benefits in your package.

How Do You Determine Your Desired Salary?

You can follow these steps to calculate the best salary for your desired position:

1. Research average salaries for the role

Start by doing online research on current salaries for your desired job title. This gives you a broad compensation range depending on location, company size, industry, experience and education. Remember that salaries depend on several factors, so use the numbers you find online as a rough approximation. You can also discuss your desired salary range with friends, colleagues and mentors and ask for their feedback. This helps you calculate a realistic salary range for the desired role.

2. Factor in the cost of living

The average pay for the same role varies depending on location. For example, the compensation offered to candidates in Tier-I cities is usually more than the pay of candidates in smaller towns due to the differences in the cost of living. If you are relocating for the role, you can factor in the cost to maintain the same standard of living in the new city.

3. Consider your experience, seniority, skills and education

Besides location, experience, education, seniority and skills are other factors that determine the salary. To assess your expected salary, you can research the average years of experience other employees have for the desired role. For example, if you have significantly higher experience than other candidates applying for the position, you might be able to negotiate higher pay.

4. Know your non-negotiable limits

Calculate the minimum salary you desire to maintain your current lifestyle. Knowing your non-negotiable limits helps determine whether it makes sense to pursue a job offer. You can politely decline the offer if the employer offers a value below the minimum salary with no room for negotiation.

Where Do You Mention Your Desired Salary On An Online Job Application?

Some job applications offer candidates a chance to name their desired salary. If you are interested in negotiating, a strategic approach is to avoid mentioning this number on your job application and discuss it directly with the recruiter during the interview instead.

Try checking if the online application requires you to provide the expected salary. If it is not mandatory, you can leave the field blank. If the application requires you to answer, you can write in 'negotiable.' If the application requires you to provide a numerical value, you can write it as '000' or '999' and explain elsewhere in the application that you are open to negotiation.

How Do You Answer The Interview Question, 'What Is Your Desired Salary'?

Employers often discuss the candidate's expected salary in an interview. You can use any of the following approaches to address this query during the interview:

1. Postpone the question

If you are still early in the hiring process and learning the specifics of the role's responsibilities and duties, you can consider postponing the question to the later stages of the recruitment process. Take the time to fully comprehend the job and determine an appropriate range per your responsibilities, skills, and experience. Remember that salary negotiation is an essential part of the interview process and having a reasonable salary range helps the employer determine whether they have the budget to hire you.

Sample response: 'I do not have a specific number yet. Before I answer this question, I would like to learn more about the role and responsibilities. This would help me provide a realistic range appropriate for the role and my skill set.'

2. Provide a salary range

When discussing the salary with a potential employer, it is always better to provide a salary range than a hard number. This gives both you and the employer flexibility for negotiations. Keep in mind that the employer might offer the lower end of the range, so ensure your desired salary is close to the lower range you offer. Also, it is helpful to keep the salary range narrow to show that you are familiar with common salaries for the position.

Sample response: 'I am looking for an annual compensation in the range of ₹12 to ₹13 lakhs.'

3. Include non-cash options in your response

Often employers provide non-cash benefits, compensation and perks like bonuses, equity and stock options, tuition assistance, flexible working hours, paid leave, work-from-home opportunities and parental leave to compensate for a lower take-home salary. While discussing the desired salary with the employer, you can consider the non-monetary compensation to determine your range. For example, an employer might offer you slightly lower pay but provide several other perks that might appeal to you.

Sample response: 'I am looking for an annual compensation in the range of ₹8 to ₹8 lakhs, but I am open to negotiating the pay based on bonuses, equity and other benefits.'

4. Support your answer with research and evidence

Know the average salary for your job role, industry and the local area. Researching the average salary for your desired role can help you provide a realistic answer supported by evidence. For example, if the average pay in the industry for your desired position in your city is ₹8 lakhs per annum, you can include this number in your answer.

Sample response: 'Based on my research, I understand that the average pay for this role for a candidate with my experience is ₹8 to ₹10 lakhs per annum. I have seven years of experience and recently completed a reputed industry certification relevant to the role. I believe this qualifies me for a higher salary and I request compensation of ₹9 to ₹10 lakhs.'

5. Explain why you are asking for a higher pay

If you are switching jobs for higher pay, you can mention it in your answer. Explain why there is no option for a raise in pay in your current role and what kind of pay raise you are seeking. You can also mention any certifications or courses that you have completed recently to justify your higher pay.

Sample response: 'My current salary is ₹6 lakhs per annum, the maximum compensation my current employer can afford for this role. I have recently upskilled by completing an MBA, which provides me with the expertise necessary to apply for this role. As this position is more advanced than my previous role and I would take on greater responsibilities, I think a 10% increase in pay is fair compensation.'