It’s often said that you don’t realize most of the monumental life decisions until after they have happened. The bar you decided to go to on a whim where you met your best friend. The chance encounter on a train that led to a new job. Even the haircut that led you future spouse to “accidentally bump” into you one day.
Sometimes you never see them coming.
Thankfully, salary negotiations are not one of those types of moments although, for many people, they often feel that way. Why? Because HR folks go out of their way to make them feel that way.
Of course, it all sounds so innocent:
HR: So this brings us to the end of the interview process. Feedback has been very positive but usually have a meeting to discuss before moving to the next steps. Just out curiosity, what is your current compensation?
Bam! That’s the sound a signpost on the crossroads of life makes when it’s thrown right at you.
How have you reacted in the past to this question?
Most people out of a combination of slight shock at the question being slipped in and a general sense of wanting to be helpful just hand over their current compensation numbers. What they don’t realize is that they just lowered their lifetime earnings by potentially hundreds of thousands of dollars.
“What??” you might be asking, “How is that possible?”
Good questions. Let’s step inside the mind of a HR person who does a lot of hiring.
Their mental model looks something like this:
- Find out what the candidate currently makes
- Most of the time that’s WAY less than we would be willing to pay them
- Generally, people won’t leave for less than they currently make
- Given the above, if they are sitting here interviewing, they are most likely not happy where they are
- Therefore, if we offer them slightly (5% or so) more than they currently make and they take it, we’re golden!
“I get that Alex but it’s still 5% more than I make now!”. Very true. Let’s say you make $100,000. That’s an extra $5,000 more for you per year.
If you had said something like:
You: I’m sorry I don’t give out my current compensation numbers. However, I can say that I’m looking for $200,000.
Odds are you are going to end up at a number much closer to $200,000 than $105,000. If that number turned out to be $160,000 over the next five years you would have made an extra $300,000 (5 years x $60K) vs $25,000 (5 years x $5K).
“Wow! I never thought of it that way!” should be what you’re thinking now which is good.
Your next thought might be “But wait. Alex, these conversations are never that easy. Plus, I’m not a fast talker and these HR folks do this all day long! How can I compete with their years of experience?”
Later on in this post I’ll give some “scripts” that you can use. Before we get there though, let’s start by going over some of the basic assumptions of the negotiations.
Do I have to give my current compensation?
The short answer to this question is: no. You are not required legally or otherwise in the
If I don’t give my current compensation, can the company decide not to give me an offer?
The answer to this is very clear: yes. This is certainly a possibility. Some companies refuse to make any offer without current compensation numbers. This is their right so it’s best to be prepared to run into them from time to time.
That being said, my general advice is do not work for these types of companies. Why? By taking this stance the company is signaling to you that they don’t value you based on your contributions to the company.
In fact, their policy communicates that they care more about keeping payroll low than they do about attracting top quality candidates.
Again, there are always exceptions but in both my personal and career coaching experience these are not firms you want to deal with.
I’ve heard that even if I don’t have to give my current compensation, I also shouldn’t give my expectations?
This answer is more complicated. From a pure negotiation strategy point of view, yes, you should never give the first number. This is based on the idea that if you give a number first, you are both anchoring yourself to that number and potentially giving a number substantially lower than what the other party was willing to offer. Further, it assumes that you have no knowledge of what the other party is willing to pay and no way of determining that information.
We can address these points one at a time.
First, with regards to anchoring, it is a perfectly rational game theory approach to lead off with a first number that is highly advantageous to you. This way, you are at least controlling the initial anchor point.
“But what if they were willing to pay me more??” you ask.
Good question. If you start off with a number already in your favor you have eliminated the prospect of getting a “bad” deal for yourself. While you could have potentially gotten a better deal, you have drastically increased the odds of getting a good deal.
“But doesn’t that cap the maximum I can get from them?”
No and here is why: it is perfectly ok to give your number, find out more about the role and then say the following: “I see. Well given what you’ve told me about the position, that’s a bigger role than I was expecting when I gave you my initial number. Given that, I am going to raise my expectations with regards to compensation”.
Second, this is the age of the Internet. With LinkedIn, Facebook, Glassdoor, emailing your friends who know friends etc it is incredibly easy to get a handle on what a firm pays its employees. Work your personal network and you’ll be surprised to find at least one friend/ex-coworker who knows what everyone makes. Some people make it their hobby to find out this kind of information and these friends can be a gold mine when it comes to salary negotiations. Barring that, headhunters and career coaches are also excellent sources of general compensation numbers.
So let’s get to the scripts.
NOTE: My comments are in italics.
HR: So how much do you currently make?
You: So as a professional courtesy to my current employer, I don’t give out current compensation numbers.
HR: Well, that makes it very difficult for us since we don’t know what to give you an offer that is below what you currently make.
Here they are appealing to your “helpful” side. Remember, it’s their job to deal with this so they want to make it as easy as possible for them.
You: I understand that. I still do not give out compensation numbers. If I end up being an employee at your firm and down the road I move somewhere else, I would extend that same courtesy to you.
HR: We appreciate that but we still need some kind of number to work off of.
They can be pretty persistent here so be strong!
You: I’m sure that you have a number in your head in regards to the type of value that someone with my background would be adding to your firm. How about we start there. What kind of number were you thinking?
You’ve now putting the ball in their court to give a starting number. They can basically come back with one of two answers
Answer 1: they give the number
HR: So we had in mind something around $X. What do you think about that?
If this is a number much less than you currently make you should ask yourself: “Do I want to work at a place that pays so little”?
If the number is higher than you currently make, first do a little dance of joy in your head and then your default answer should be:
You: That is somewhat lower than I was looking for. I would be more comfortable with 1.5 * $X.
NEVER accept the first offer! That’s another one of the iron laws of negotiations.
Answer 2: they REALLY don’t want to give a number
HR: I’m sorry we just don’t operate that way. I really need your current compensation.
You mentioned before that you generally don’t want to work for companies that operate this way. That being said, it’s always worth at least finding out what a company would pay. You can do that by being the first to offer a number.
You: Let me put it this way: it’s one of my core principles to not give out current compensation. I’ve read a lot about your firm and that is highly values it’s own principles and those of the people it hires so I’m sure you see where I’m coming from. I also understand your need so how about a compromise: I can give you my expectations and you can tell me if that’s in line with what you are looking for. How about $Y.
NOTE: $Y should be AT LEAST 1.5 times what you currently make and prefferably double. Yes, double Why? Because that is your starting point and you are going to most likely negotiate down from there so give yourself plenty of room to maneuver.
These are great points! I’ve got a negotiation coming up and I want to find out more. How do I do that?
One of the many services I offer as a career coach is how to handle these situations to your benefit. Hiring managers are at a distinct advantage in that they go through this every day. You may only have to negotiate a salary every few years.
After years of coaching clients through the same process, I can help you through every stage of the negotiation process via mock interviews, detailed scripts and sample emails that you can use with hiring managers and together we can maximize your future compensation.
You should check out my career coaching service.
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