how can describing a present value of a stream of earnings be used to help a possible new hire overcome objections to a small starting salary
How can describing a present value of a stream of earnings be used to help possible new hire overcome objections to a small starting salary?
Describing the present value of a stream of earnings can be a useful tool in helping a possible new hire overcome objections to a small starting salary. Here's how you can use it:
1. Understand the concept: The present value of a stream of earnings refers to the current worth of future cash flows that an individual is expected to receive. It takes into account the time value of money, which means that a dollar received in the future is worth less than a dollar received today.
2. Calculate the present value: Start by estimating the future earnings that the new hire can expect over a specific period, such as five years. Consider factors like potential pay raises, bonuses, and career growth opportunities. Use a financial formula or an online present value calculator to calculate the present value of these future earnings.
3. Present the data: Once you have the present value figure, you can present it as a tangible benefit to the new hire. Explain that by considering the present value, the actual worth of the offer may be higher than the initial salary indicates. This demonstrates that although the starting salary may be lower, the overall value of the compensation package is more significant.
4. Contextualize the financial benefits: It is important to frame the financial benefits of the present value in the context of the new hire's career progression. Emphasize that a lower starting salary can be viewed as an investment in their future earning potential. Explain how the company offers opportunities for growth, training, and development that can lead to higher salaries and better job prospects in the long run.
5. Highlight the non-monetary benefits: In addition to the present value, emphasize any non-monetary benefits that the company provides, such as flexible working hours, work-life balance, a positive work environment, career advancement opportunities, or personalized professional development plans. These benefits can further enhance the overall value of the job offer.
By explaining and demonstrating the present value of a stream of earnings, you can help the potential new hire understand that a small starting salary is just one aspect of the compensation package, and that there are numerous future benefits that can offset any short-term concerns.