As more U.S. cities and states are banned from asking job candidates, “So, what’s your salary?” recruiters and hiring managers at companies are wondering: How do we determine if we’re in the same compensation ballpark with incoming candidates? We have long relied on the salary history question to provide early insight about whether the candidate was underqualified (undershooting the salary) or unattainable (overshooting the intended salary) .
Some would have you believe the salary history question is wildly prevalent. However, recent PayScale data shows that [clickToTweet tweet=”Fewer than half of applicants are asked about their previous salary during the hiring process.” quote=”fewer than half of applicants are asked the question during the hiring process”].
This surprising statistic may be the result of the new legislation or because some companies are realizing this question isn’t the most effective way to get the insights they’re seeking.
In the great salary history question debate, I believe employers should not ask the controversial question. That said, it’s helpful to stop and examine why we have done it for so long. Dr. John Sullivan provided a list of 10 reasons that businesses rely on the salary history question. Once we identify why employers are asking the question, we can seek other – and arguably better – ways to get the information.
What information is being sought?
As with all questions during the interview process, a lot can be gleaned by reading between the lines. First and foremost, hiring managers don’t want to waste time. They want to know: Can we afford the candidate? But, managers also want the “history” component of the salary history. Ultimately this answers the question: How has the candidate’s pay increased over time?
In addition, hiring managers want to know whether the candidate is ambitious. Assuming the candidate can find easily attainable information about pay, the company is able to assess the gap between prior pay and future expectations. That is the ambition gap, if it falls within the sweet spot of not being overly ambitious. Finally, the salary history question presents an opportunity for negotiation which allows employers to assess the candidate’s ability to communicate with confidence.
Other approaches
There is something very practical about asking salary history to determine if there an insurmountable gap between the candidate’s pay expectations and what the employer is willing to offer. However, instead of asking about salary history, managers can be as effective by taking another path. Here are a few approaches for companies who want to avoid the salary history question:
- Price the job, not the candidate. When an employer determines how much they’re willing to pay for a job before the interview, they apply their business and compensation strategy to a data-driven market approach to set pay. Companies have priorities and some jobs are valued more highly than others, or some jobs are more difficult to fill, so they’re willing to “pay up” for these positions. Ultimately, companies should price jobs in the market, based on their business goals, and then locate candidates within a range based on their unique value-add. This results in a hiring and compensation model that’s more closely aligned with the company priorities.
- Develop a pay brand. An employer brand designed specifically for compensation which includes a commitment to fair pay and transparent pay decisions can foster better, trusting relationships with both candidates and employees. Employers are facing an extremely competitive talent market for many jobs. For example, 41% of tech companies report that over half their jobs are competitive (versus 23% of all companies). Unemployment is low and job mobility is high. It’s a candidate’s market, so employers should look for ways based on culture to differentiate themselves from the rest of pack.
- Ask about salary expectations rather than history. Shift the focus away from a discussion about the past to a discussion about the future potential of the candidate. Job history should not be the thrust of the conversation because a manager may overlook the ambition of the candidate. In addition, there are significant shifts in pay by industry, organization type and geography. With greater job mobility, the numbers may not tell the right story. By talking about expectations, companies can focus on aligning pay with the job responsibilities and the company’s future.
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Liz Ryan offers some additional suggestions in “Here’s What to do When You Can’t Ask About Salary.”
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The way a candidate responds to the salary expectation question can also provide valuable insight into their professionalism and savvy. A response such as, “Great question. I’ve been researching the job in the market and it looks like a typical salary for this job in this market is X” would let a manager know the candidate is data-driven, has done their research and can speak confidently in potentially difficult situations.
Find the right words
Sometimes the barrier to doing something new lies in understanding how it sounds. What are the actual words recruiters and hiring managers would use to talk about salary expectations instead of history? At PayScale, the company where I work, even our recruiters found that shifting the conversation can be challenging. However, this is foundational change that can have far-reaching implications. Here’s how to get it right:
- Contextualize the question. “It sounds like you may have some of the skills we’re looking for in this role. Before we get too much farther, let’s talk about the compensation for this position. Can you tell me your salary expectations?” The key is to begin the conversation early, even as early as the first call. But be prepared, some candidates will dodge the answer, possibly asking, “Actually, I was curious what you’ve set as the range for the position.”
- Share the compensation range. Often companies hesitate to share a range because they feel candidates will always seek the top of the range. This is another time where being clear about expectations can guide the conversation. “We’ve set a hiring range from X to Y. Some of the things really driving pay for this position are skill A and that responsibility B. As we progress through the interview process, we’ll come to an agreement about the right place for you in the hiring range. Does that sound good to you?”
- Underscore the company priorities. Reinforce the value of the position relative to the organizational goals and engage a conversation about what motivates the employee. “This position helps us ensure our customers get the best service, which is core to our organizational values. We recently did a market study and found that X is typical for the role. Are you most motivated by pay, flexibility or the ability to really make an impact in the organization? How do you see yourself thriving in our organization?”
- Share the market value for the position. Rather than asking the question, share your hiring range for the position and explain why the range is set where it is. “We’re trying to grow such and such area, so as a result we’ve targeted very competitively in the market. Our hiring range is X to Y. Let’s talk about where you’d fit into that range based on your experience, skills and project results.”
Not ready for compensation transparency?
You’re not alone if you’re not quite ready to be that open with your pay decisions. In PayScale’s 2017 Compensation Best Practices Report, only 49% of organizations aim to be transparent in 2017. However, pay transparency is a growing trend, as only 31% of companies were open about pay in 2016, so don’t get left behind.
Some employers hesitate to share information because they’re unsure if they have a competitive offer. Companies need to know how their offers stack up in the market because employees are looking at data to guide their negotiations. It’s true that some organizations can’t afford to pay top dollar, but they should still use talent market data to guide their offers and then emphasize other benefits of the job, such as the ability to make a significant impact or contribution, direct access to organizational leadership, flexible schedules or meaningful work.
At the end of the day, every conversation about pay is an opportunity to talk about what matters to the employee. Compensation discussions offer an opportunity start the relationship with that candidate on the right foot by building trust and focusing on their role at the company, not their past salary. Be sure to ask about expectations, or better yet, offer a number first.