“How much did you make in your last job?” – The Salary Question 07/06/2018

The Salary Question

 

Written by Hannah Park – Consultant, Asia Pacific for Taylor Bennett Heyman. 


For many, salary is a sensitive subject.  When it comes to discussing pay rises or new compensation packages, even the most seasoned negotiator can feel uncomfortable.  There has been heated debate for some time now about whether prospective employers, and indeed recruitment professionals, should be asking candidates for their salary details – and whether candidates have any obligation to disclose these.

After all, is it really relevant what someone is being paid in their current job when applying for a new one?

One side of the argument says that the salary question has the often unintended consequence of perpetuating, or even increasing, existing inequalities.  This occurs when a hiring organisation bases its offer package on a candidate’s current compensation, rather than the new hire’s skills and experience, or indeed the scope and responsibility of the role they’ll be performing.  Such an approach means that people belonging to historically underpaid gender or ethnic groups remain underpaid throughout the course of their careers.

What’s more, there are indications that attempts at the individual level to disrupt this cycle of inequality can actually have the adverse effect.  A 2017 study by the compensation data website, PayScale, showed that a woman who declines to disclose her salary history when requested is paid 1.8 per cent less on average than a woman who agrees to do so.  By comparison, a man who refuses to disclose his salary history is paid 1.2 per cent more on average.

Over the last year, as part of the wider effort to combat wage discrimination and the gender pay gap, several cities and states in the U.S. have passed legislation that prohibits prospective employers from asking questions about applicants’ compensation history.

“It’s still too early to gauge the extent to which the new laws in the U.S. will address wage discrimination, but initial signs suggest the wider labour force has benefited.”

Moreover, an increasing number of businesses, including Google, Amazon, Facebook and Bank of America, have taken a proactive stance and implemented company-wide bans, regardless of local legislation.

These steps have by and large been welcomed.  However, experts recognise it’s not a silver bullet.

Some research suggests that even when salary history isn’t disclosed, and candidates are simply asked for their salary expectations, women typically name a lower figure.  In view of this, the legislation as it’s currently set out would not prohibit employers from offering female candidates less than men based on the assumption that they will accept it.

The new legislation has also seen some opposition from those who see it as intrusive to their business.  A common argument is that obtaining salary information can help to identify those candidates who exceed budget, as well as ensure that you are developing a competitive compensation package.  Though, of course, one could contend that asking a candidate about their salary expectations could garner the same insights.

It’s still too early to gauge the extent to which the new laws in the U.S. will address wage discrimination, but initial signs suggest the wider labour force has benefited.

At one end of the scale, you have those individuals who are at the top end of the remuneration bracket for their profession.  Sharing their salary information can put them at risk of being deemed too expensive by prospective employers, thus leaving them priced out of the market.  However, we do see examples of professionals operating at this level whose key driver when looking for a job is the role itself, rather than compensation package, and are in fact willing to take a pay cut for the right opportunity.

On the other side, there are those individuals who are currently working in a lower-paid sector (e.g. non-profit) but applying for a role in a higher-paid sector (e.g. financial services).  By removing the salary question from the equation, these candidates can feel more confident that they won’t receive low-ball offers from prospective employers “eyeing a bargain”.

With that all being said, are there any scenarios where sharing salary information with prospective employers can be beneficial for job seekers?

One particular instance where we have seen the value of providing some detail around a candidate’s existing compensation is during the offer development process for senior-level hires.  At this level, compensation packages often include a range of additional benefits on top of the basic salary, some of which are forfeited depending on the timing of the resignation – bonuses and unvested stock, for example.  So, having a picture of these additional benefits can aid the hiring organisation in crafting a competitive package, particularly in terms of compensating the candidate for any components they’ll be leaving on the table by making a job switch.

Whatever your view on the salary question, it’s apparent that the issue isn’t clear cut. However, as a general rule of thumb, we would advise hiring organisations to remember this: you are hiring a professional, not a pay packet.  In putting together an offer, assess what value the individual is bringing to the role through their skills and experience.  And, just as importantly, determine what value the role is bringing to the business.

 


 

What your views disclosing salary details to prospective employers? Share your thoughts with us over on LinkedIn or Twitter.

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