Saturday, May 11, 2013

Should you reveal your pay at the initial job interview?

I was having drinks with my colleagues and one of them shared the experience of a interview at a local statutory board. At the first interview, one of the two interviewers asked for my colleague's current salary. My colleague was very annoyed given that it was just the first round of interview and refused to reveal any figures. Although he felt good vibe coming from the non-probing interviewer due to his technical fit, my colleague was not offered the job.

Why do HR-types and recruitment consultants always ask about your pay? This is because they want to collect data to find out about the market rate (especially recruiters!) so they that the company can manage budgets as well as show their own bosses that they are not overpaying for their hires.

Let me use scenarios. The basic assumptions are that  you are graduate currently making SGD 35,000 a year and you going for a new job that pays at least 20% more. You are well qualified for the job in terms of technical skills and experience. You go into an interview, the first round, with ABC Company, who unbeknownst to you, are looking at filling up this position they have open at SGD 50,000 a year.

Here are some hypothetical situations at the first round interview:

Scenario 1
ABC : How much are you currently drawing?
You : (not answering the question) I am looking at SGD 42,000
ABC: We are going to offer you the job at SGD 42,000
Analysis: You get your basic requirement, ABC saves SGD 8,000

Scenario 2 (you did market research on pay but reveal)

ABC : How much are you currently drawing?
You : (not answering the question) I am looking at SGD 50,000
ABC: How much are you currently drawing?
You: SGD 35,000 per year.
ABC: We are going to offer you SGD 45,500 because it is a policy that we cannot offer more than 30% higher than your last drawn.
You: You take up the offer.
Analysis: You get your basic requirement plus SGD 3,500 more, ABC saves SGD 4,500

Scenario 3 (you did market research on pay and did not reveal)

ABC : How much are you currently drawing?
You : (not answering the question) I am looking at SGD 50,000
ABC: How much are you currently drawing?
You: I think the market rate is about SGD 50,000 and that is what you probably have as budget for the position.
ABC: Okay. You got the job.
Analysis: You get your basic requirement plus SGD 8,000 more, ABC saves nothing.

Intuitively, armed with a good negotiation tactic and market research, you are likely to get even more pay from the job interview. Scenario 1 and 2 happens most of the time, 3 only for the most confident of candidates.

 In the simplified scenario 1, if you reveal your pay and it falls within a 20% range, you are likely to pass HR. Companies try not to pay you too small a differential, otherwise you will not jump ship.

For scenario 2, it tends to happen with professional HR, e.g. a very big company. They are likely to negotiate with you to bring it down below the threshold. Giving you too large a pay increase makes them look bad in terms of KPI and will diminish the effect of future increments to you.

For scenario 3, companies usually relent when the job market is very tight and they need it filled urgently. This is almost the same as scenario but you maxed out their budget because they are very desperate for qualified people. 

The common thread in all three scenarios is that if you were to first reveal your current salary, rather than pay expectations, HR has got all the upper hand even if you are the person they are looking for. The antidote is talking to insiders or visiting websites like glassdoors or and find out about the remuneration. Of course, you should also be looking at career advancement and work culture.You also have to work on your interview skill on handling this question of how much you are drawing (there are many answers online). However, with this regard, if you are desperate for a move, you tend to bargain poorly. There is also a tendency for the candidate to relent because they do not want to be perceived as too money minded.

My personal experience, as with my colleague, is that if a company is very worried about meeting some KPI even though it is within budget, you are better off without them. There were a few times that at the first interview I was asked about pay and I did not get the job consequently. I was a fresh grad!

There are of course happy episodes. I got much more than my then first job (40% more) and expected pay (23% more) because I reason that the hirer was not HR, not local and was fully aware the reality that you have to pay people slightly above market rate to prevent turnover. The qualifier is that you have to be the candidate that they are looking for before they tap out their budgets. There are also higher expectations that come with higher pay but I guess it is better to make more money while you can.

Do you have similar experiences to share? 

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