Up until basically right now, “How much do you make?” was the go-to question that was asked of prospective candidates even before an interview started. A recruiter would intensely grill you over your salary and bonus compensation prior to submitting your resume to the company. The corporate internal human resource recruiter would either ask you or have you fill out an application demanding salary, bonus and other remuneration, prior to conducting an interview. Even online corporate websites would require this data before allowing you to submit an application. Your compensation history, despite denials from the company, would be weighed heavily into their decision of how much money to offer you. Fortunately, for most job seekers, these days are over.
First, a little boring history lesson. This rule was enacted, in part, to close the controversial “gender-based pay gap” between men and women. Another rationale for the law is to address the perceived unfairness of a job applicant held prisoner to his or her current salary.
Let’s put aside the gender gap question for now, and just focus on how this new edict would work in reality. On the positive side of the equation, this new law could greatly benefit a candidate who is at the top of their field but earning considerably less than what is being offered for a similar job with a competing firm.
Initially, I was a little worried and skeptical about the new law that was recently put into place in New York, and other cities and states throughout the US prohibiting employers from asking a candidate about their salary and compensation history. I was concerned that, although the new law prohibiting companies from asking your salary could be advantageous to candidates, it could also have some big unintended consequences.
The way it currently works, (or used to work), is that before any interviews are conducted a hiring manager or human resource professional will ask a candidate how much they are earning, or require the applicant to complete an application that demands the detailing of his or her current salary and prior compensation history. At the end of the interview cycle, prior to an offer being extended, the firm would demand W2s, pay stubs, other documentation or attestations regarding a candidate’s current and prior compensation history. Although, this question was presented at the beginning of the process, this time the company wants signed documented proof. No fooling around at this point. You would be surprised how many people fib about their compensation when asked verbally only to caught in their lie when they are required to provide written verification.
Over the course of my twenty years of recruiting experience, placing literally thousands of people, we have noticed that the salaries offered have been in a tight range of a ten to twenty percent increase to the applicant’s current base salary, assuming bonuses are equal. If you plot a bell curve, the offers would fit tightly into this band. It is only a relatively small deviation from the norm, for offers to be made under ten percent of the candidate’s salary or exceeding twenty percent.
The spread between the ten and twenty percent depended upon how hot the market was at that particular time, and how on target and desirable the candidate was to the job. It almost seemed like collusion to me that the numbers always came in this way. When people would ask about salary exceptions, I would prepare them for this percentage rate. While I would say apologetically to the job seeker that it may not be fair or right, but based upon my experience, this is a reasonable expectation.
Now, when a candidate won’t have to disclose their salary, offers could greatly exceed this range. For example, if a person is working at a job earning $100,000 but has the skills, experience, and background to do another job somewhere else paying $250,000, they will not be held prisoner to their current salary. This would be fantastic news for some people who have the skills, ambition, drive, and ability to significantly change their financial life in a very meaningful manner.
Fast forward to today, you can not ask candidates how much they make in salary and incentives. What I have been doing is inquiring as to what they are looking for, and share what the company is offering within a certain range. This just made my life so much easier. No more haggling. I don’t have to pry into people’s salary. I don’t have to deal with the justifiable angry questions, such as “Why do they need my salary? Isn’t it unfair, since if I am making a low salary they will take advantage of me? If I can do the job, what difference does it make what my current salary is?”
There is one major logistical problem. I foresee situations in which a candidate feels that he/she is underpaid. Let’s assume the person is earning $150,000. The human resources person does not ask about his or her salary, and starts the interview process. There may then be five to seven rounds of interviews conducted over the next three to six months. At the end of this process, the Human Resources person will proudly and excitedly announce that the firm would like to extend an offer of $120,000, thinking that it is a fantastic offer. Seeing that the offer is far below his/her current $150,000 salary, the candidate and the company realizes that this has been a colossal waste of time.
This example illustrates that the new law could have serious, unintended consequences when there is a lack of transparency regarding compensation.
Despite potential problems, the positives seem to outnumber the possible negatives. Now, as a recruiter, I can simply share the candidate’s resume, write up a little summary about his or her experience, and share what they are looking for with respect to compensation. This is much better, easier and cleaner than I thought it would be.
For the candidate, it becomes much more straightforward. Here is what you should do for the new law. Before embarking upon a job search, you should conduct extensive due diligence as to what jobs in your field, with your specific type of experience, currently pay. You can Google the question, ask friends at other companies, former coworkers and colleagues. Be prepared, I know this will shock you, but most people tend to exaggerate how much they earn, so discount a little bit off the numbers that certain people give to you. Also, others will be uncomfortable telling you how much they make. When that happens, just ask for ball park numbers, and don’t make it like you are asking them for a copy of their paycheck. Take job sites that offer salaries with a grain of salt. I have not seen many that are very accurate, for mid to senior level, specialized professional positions. You could also research job postings that seem in line with your job and offer a salary range on the job description, and factor that into the equation. Also, think of your salary history and the percentage of salary offers that were previously made to you.
After doing this homework, you can do the following. To make things easy, if you are earning $100,000.00 per year, plus a twenty percent bonus, and you know that your field previously offered a ten to twenty percent increase, then you could ask for a base salary in the $125,000 range plus a bonus in the twenty plus percent area. This gives room for negotiations by asking for more than the normal increase, so if they give it to you that is great. If not, you started higher and have room, which will still give you want you wanted. I know you are thinking why cant I ask for $150,000? You could. The challenge is that I have seen when candidates shoot too high, companies will come back to me and say something like, “I’m so sorry, I love Jane, but that money is too rich for us. We like her soooo much, but don’t want to disappoint her, so we will take her out of the running.” When they say this, often times it is sincere. They like the candidate and would not want her to be unhappy with the pay if she were to take the job. I’m then in the position where I beg them to understand that Jane was just negotiating. It’s okay, she’ll take a little under $150,000. It’s interesting, more often than not, the company will still stay with their premise that Jane will be unhappy, and that she should keep looking for a position that will pay her that amount.
Now, the real wildcard in this new era will be the bright, ambitious underpaid person who interviews well. There is an outside chance that someone earning $80,000.00 could talk themselves into a $150,000.00 salary.
It will be very interesting to see how everything turns out. I will keep you posted, with real life examples of how this new law works, as times goes on.