Over the last 20 plus years of recruiting this question has always felt a little uncomfortable to me. Mostly due to my parents believing asking someone about money they make to be the height of rudeness. Today many State Legislatures have agreed with my parents by outlawing the current salary & compensation question in recruiting for new positions.
The California (Labor Code 423.3) law provides that applicants may “voluntarily and without prompting” disclose their own salary history information to a prospective employer or agent (me), so the common approach is to wait for an applicant to provide the information or to exclusively discuss his or her expectations for the position. This new standard is catching on across the country. In the national talent marketplace, a new recruiting dialogue is emerging.
So, what was the old recruiting dialogue? Well, it was simple! Employers and Search Consultants would ask: What is your current salary and if you were to resign today what bonuses/stock would you be leaving behind? An example: Salary $200,000, annual bonus $100,000 and unvested stock $50,000. The standard practice was adding 8-15% to the base salary and match the rest by granting stocks and a cash signing bonus. This approach is essentially no longer legal in California and creates new standards and challenges for potential candidates, hiring executives and search consultants.
The challenge for those managing their careers is to know exactly what their experience, skills and achievements translate to monetarily in the career marketplace. There is no reliable source of objective data for candidates to reference. The common anecdote for most potential candidates is someone on their team left and got twice as much in compensation according to them.
The hiring executive has their own problems. The experience, skills, and achievements they need are not available internally requiring them to hire from the outside. The position is usually defined by what needs to be accomplished in the first year requiring someone who has done it or something very similar before. As we consult with the hiring executive regarding desired compensation for the position we often hear: “I probably can’t go over $230,000 base salary anything more will blow a hole in my budget. However, I’ll pay what it takes in base, yearly bonus and stock…within reason.”
That within reason part is the problem for the potential candidates, hiring executives and those of us who are crazy enough to insert ourselves in the middle. So, we’re off looking for this wonderfully unique individual ready to take on a “Mission Impossible” opportunity with my client. We begin with a basic search of our databases finding less than 100 potential candidates with their experience, skills, and achievements qualified to pull off what my client needs to accomplish.
We start the search for this potential candidate doing everything we can to set a time to interrupt their busy lives and tell them how wonderful their background may be to my hiring executive. We schedule a call where the potential candidate shares, they are called all the time and know their value in the marketplace. We talk about compensation carefully by not being a rude lawbreaker asking what their minimum expectations will be to consider a new position.
We also discuss the position and agree that it is worth an introductory call with the hiring executive. I share that my client is reasonable however would like to keep the position in the $200,000-$230,000 base range. I legally inquire “What are your compensation expectations given a base, yearly bonus and stock for a new position?” After 20 of these potential candidates calls, we have three candidates interested and open to a conversation with the hiring executive. Two of the candidates said their minimum base salary were equal to $230,000 and one said $275,000.
We present all three candidates to the hiring executive who shares that her base is $325,000. We want to respect everybody’s time here and although the $275,000 professional has the best background the hiring executive does not see that “ask” as being reasonable. We share that they did not “volunteer” their current compensation however wanted serious consideration. Unfortunately, I must be very careful in these conversations.
We set up calls with the other two candidates and the hiring manager. The call to the $275,000 candidate never goes well for me.
Usually, the candidate now out of consideration for salary says: “I gave you that salary number to guarantee my total cash compensation is now! Since I don’t know what they would offer and wanted to cover my downside risk.” My only response is you’re right we don’t know! I can’t “prompt” the candidate to tell me the structure of their current compensation to facilitate a comparison. These conversations leave both of us frustrated and not productive.
My suggestion with legal disclaimer here is that you consider voluntarily sharing the structure of your current compensation and ballpark expectations. Such as “I’m paid a base salary, annual bonus up to 100% of my base and unvested stock over 3 years. I’m reluctant to leave at this point however for market reference my total annual cash compensation has been in the range of $250,000-$300,000. I wouldn’t consider leaving without at least a 15% bump in total cash compensation. The position would need to be my next challenge and step up in responsibilities.”
I understand why this law was passed and should help those in positions performing repeatable transferrable processes with structured industry wage bands. However, for those in positions where compensation is based on results grow revenue or increase profit you need to understand your value. We have a career guide that helps you to determine your marketplace value.
Hope this helps and my attorney wants to remind you to seek out professional legal advice and take my career advice for what it is…free.