How people set their Salary Expectations ?

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How do people set their Salary expectations?

Particularly the one who are returning to job-market after a break, returning from other country or switching careers.

For instance when I returned from Japan, and was looking forward to my career shift, I asked. Many were tight-lipped. Even friends won’t share the details. And you will find them very diplomatic like “it depends”.

So when one more colleague is planning to return from Japan and mentioned he is expecting a salary of 20 Laks per annum as Project Manager in  IT firm.

I just explored casually (not some serious research though) …

One friend, who is senior architect in one of the leading software firm, & based in Pune mentioned a thumb rule at his work-place. 

We normally stick with 1.5 times experience. If he has 10 years of experience, reasonable expectation is 14 to 15 Laks per annum. And further this is moderated by skill-set, technology, certifications, kind of organizations, projects that one worked with and need of resource at that point of time.

Just couple of days back, I was talking to another friend. She was with consulting firm, and then resigned for some continuing education (not really increasing her marketability in corporate world). She mentioned that she is expecting a salary of 18 Laks per annum. I was little surprised and asked source of this figure.  Her argument...

Typically MBA receives the average salary around 7 Laks per annum. She has around 14 years of post-MBA experience.  So she added one Laks per year of experience and discounted for the two years of break.

Both the responses forced me to think.

Though there are salary surveys, ( here too ), user-forums, and reports on compensation trends, they don't really answer such special cases. 

More-over, these answers clearly underlined the entitlement philosophy of compensation, so for every year worked ,pay-raises are kind of expected.

Any thoughts or comments ? 

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Severance Pay ,

Severance pay is paid for terminating employment .
This can be layoff , job elimination ,restructuring or mutual agreement. If employee agreement do not stipulate any serverance pay , there is no obligation on employer to pay.

But normally employer get rid of any future claims, litigation through signed release along-with Severance Pay.

Severance pay is a positive and good thing from employer ,when job is lost through uncontrolled external circumstances. ( For example current financial turmoil ).

Japan still have the mind-set of life-time employment (Though changing) and hence in most of cases employer pays for loss of employment.In general holiday and other monetary benefits ( other than Bonus ) are also compensated.

Normally bonus is paid - if you are working till the pay-date. Off-course if retrenchment happened unfairly just before bonus , you can complain to labor office. And in good circumstances labor office may negotiate this to fair-portion.

Japanese firms like to keep low profile in such circumstances and in general for employees with two years with firm 3 months of salary plus unused holidays are paid. For more experienced employees up to 5 months plus unused holidays is the norm.

Senior employees and Managers need to negotiate . In a recent financial melt-down there are examples of 18 to 24 months of severance pays tied with signed release.

So there is surely more to watch while leaving too.

Bankruptcy and Employee Benefits

There was unimaginable fall-out in financial markets recently . Japan too was not different.
Bear sterns, J.P. Morgan ,Merry Lynch , Citi-group and biggest of all Lehman !.

Example of Lehman was very classic ,while employees were down with week-end hang-over they woke up with the bankruptcy news. Initially there was a ambiguity about whats gonna happen ,to the extent that whether even current months salary would be paid ?

After little exploring it shows what happens to employees in such circumstances -

• Firm files bankruptcy in court.
• Court monitors , dispose of assets and use incoming cash to pay off creditors.
• Taxes comes first
• Then employee claims are paid.
  
• Lastly outside creditors are taken care off.

So as long as firm is solvent and have enough assets , employee will be paid surely for the billable hours.

Normally pension is safe ( In case of Japan at-least ) but for health insurance you need to refer to your agreements.

I extracted this information from here ,here and here

Salary and Confidentiality

As long as there is some-one in your friend-circle earning more than you , you are bound to be unhappy. Firm don't want you to be unhappy and hence forbid you to discuss about compensation.

Humor apart , but back in India I found that this is common topic around water-cooler among friends. I was never aware of the sensitivity of the topic till last week.

But in Japan and in Financial industry environment , it is very sensitive topic. Two employees are fired recently in firm X for openly discussing about Bonus issues and others are reminded that this is confidential matter.

I was surprised and turn to Google to satisfy curiosity.

• In one of the surveys 51% mentioned that there is no policy regarding pay-confidentiality.
• Surprisingly in some of places ,it is illegal to forbid employees , and they can share information about wages.
• I personally feel that this is little gray area , as packages of top management are published and considered a good governance practice. Further salaries are openly discussed with recruiters and with tax-consultants.
  
• Simple web-search or even casual talk with other HR-executives shows that there is no clarity about this topic and no concrete answers available. I would like to hear some views on this. Any pointers to legal articles will be highly appreciated