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Keep Your Salary Under Wraps
got into the headhunting business in Silicon Valley when I was just 24 years old, fresh out of grad school. Not yet a real headhunter, I flew east to visit my family for the Christmas holidays that year. At every holiday party I attended, word got around that a headhunter was in the room and I was swamped with requests for advice and job hunting help. That was when it hit me: being a headhunter (no matter how "green") was very cool. I had instant friends. Without hesitation, people were whispering in my ear, sharing the most private things about their work lives. The one thing that startled me most was this: people just blurted out how much money they made.
Who says my salary is any of your business?
Now, I grew up in a working class household. Whether it was due to modesty or out of a sense of their place in society, my parents never talked to anyone about how much money they made. In fact, my parents taught me never to divulge my earnings to others. Your income was private, and your regard for another person was not to be based on how much money he earned or possessed. That was just the rule.
Today, people still want to tell me how much money they make. Maybe they think any discussion with me constitutes an interview, and in an interview you're supposed to tell your salary. After all, one of the first things that's requested on a job application is your detailed salary history. Prospective employers routinely want to see a pay stub. When they make you a job offer, you're required to sign a statement confirming your last salary. And people open their kimonos just as routinely, sharing information that is no one's business but their own.
It can be argued that your income does indeed say something about who you are. But, when you're about to begin negotiating for a new job, do you really want to prejudice an employer's judgment about you by divulging what someone else paid you? Should it really matter to a prospective employer how much money you make?
Let yourself be judged; insist on it.
In my opinion, your salary is an irrelevant measure of your worth outside the confines of your place of employment. Some will want to wring my neck for that statement, but before you don your assassin's gloves, please read on.
Your employer pays you what he thinks you are worth to him, based on what he can afford to pay you. If one's compensation were a true and objective measure of one's worth, no one would ever get a 20 percent salary increase when changing employers. He'd get only what he was already earning, or perhaps an increase equal to whatever raise his own employer would give him. If salary were a true measure of worth, it would be objective, and a given increment would mean the same to one employer as it means to any other.
But that's not the way it works. Your value actually depends on the needs and judgment of the particular "buyer," and on the buyer's ability to pay. That's why an engineer who's been earning $76k per year gets an offer for $95k to change jobs — the new employer has a need that's worth $95k to satisfy. As long as the new employer gets what he expected in exchange for the $95k, everyone should be happy. Except the engineer's last employer, of course.
Now we come to the tough part. If your value is really a function of judgment and need, why would any employer care what you've been earning at your last job? Good question, and one I'm asked all the time by people who are rightly perplexed when a personnel jockey insists on knowing their salary history.
A responsible, well-managed business shouldn't care what you've been earning. What will matter to that company is whether and to what extent it needs your abilities; how much it can afford to pay you; and how much profit it projects you will bring to its bottom line. Such a judgment requires that the company evaluate you carefully and in terms that are relevant to its business, not in terms that are important to someone else. Once the company decides what you are worth to it, negotiations can proceed in a pretty rational way. A smart company would never pay you based on anyone else's judgment of your worth, because that worth is relative.
That's why there is no reason under the sun to divulge what your last employer paid you. It simply should not be necessary because it is not relevant.
Salary surveys can hurt employers.
Now, some may argue that a company must know what other companies are spending for a given constellation of skills, if the company is to be competitive.
Hogwash. The use of human resources salary surveys can actually hamper a company's efforts to be competitive because these surveys drive job offers toward the mean. If you want to hire the best — and doesn't every company? — by definition you're seeking the tail of the curve, or to be off the curve. You don't want to hire — or pay for — average workers.
The recent controversy over the "I.T. worker shortage" proves the point. The information technology industry publication Computerworld recently reported that IT managers in some companies snatched the hiring process from their HR departments when they realized good candidates were being lost because HR was basing job offers on "industry standard pay scales." These scales — which are descriptive of past trends rather than of any job candidate's value — were serving as a poor substitute for sound judgment of the worth of a good job candidate in a competitive market.
Junk logic can hurt you.
Surveys aside, there is a reason why you personally should not divulge your salary to a new employer. Actually, there are two. The first is that it's private and no one's business. It's confidential. (Imagine that same employer reviewing a bid from a consulting firm, and asking the firm what its other clients are paying for its services.) Any company should be ashamed of itself for prying so insistently into your finances, and embarrassed to admit that it seeks to determine your value through the judgments of other companies, rather than to evaluate and judge you for itself.
The second reason you should not divulge your salary is more important. The minute you open your kimono and expose your salary, any negotiating leverage you have disappears with your modesty. The employer now has the edge. Regardless of your potential worth to this new employer, and regardless of its ability to pay you, in all likelihood divulging your salary history will restrict your ability to negotiate. What happens next can be described as nothing but junk logic: "We will base your value to us on your value to someone else."
Suddenly, your skills and the employer's needs and judgment are subordinated to a salary survey. The employer's ability to pay you what you're worth isn't the key issue now. In fact, the employer will forego real negotiations. He will relinquish his prerogative to judge your worth to someone from whose inadequate payroll you are trying to escape: your last employer. Perhaps most ironically, the new employer trusts the determination of your worth to one of his competitors. In divulging someone else's judgment of your worth, you're strangling your own real worth and your income growth.
But, an HR manager would shout, "If we don't use some sort of standard salary scales and ensure some sort of continuity in a person's compensation, the price of new employees would skyrocket and compensation would become a free-for-all!"
Oh, it would, would it? You mean the way compensation skyrocketed for doctors and lawyers before both professions were allowed to advertise their services and compete openly? It has been argued that the incomes of other professionals — engineers, accountants, software developers — should more closely approximate that of doctors and lawyers. Perhaps it would, if there weren't caps put on such incomes by the salary surveys commonly used by HR departments. (Ah, doctors now live and die under those caps, too, in the form of restrictions placed on their fees by insurance companies.) But more likely, if incomes in any profession skyrocketed, they would come under the control of market forces. The price fixing we see today — in the form of "standard salary scales" — would give way to truly negotiated salaries based on the actual worth of a person to a particular company.
Until your profession forms a union that conspires to fix the price of your services, my advice is that you stop aiding and abetting the crime of salary-fixing by employers. Don't kill your edge by limiting compensation negotiations prematurely.
Negotiate, don't concede.
There is no law that says you have to divulge your past salary, or that you must allow your future income to be limited by your past income. (Unless, of course, you sign an employment agreement that requires you to do so. Beware: acceptance of a job offer may subject you to the terms of an employee policy manual "by inclusion", and this may require you to produce past pay stubs.) There's also no law that says you have to help an employer negotiate against you. So, what should you do when confronted by an employer who demands your salary history and a pay stub?
Decline to provide it. Instead, politely and firmly state your desired salary range for the particular job. Do yourself a favor and establish this well in advance of any serious employment discussions with that particular employer. Bear in mind that your worth will vary not only with geography, but between employers: some will need you more than others and will judge your worth to be higher based on how they will put your skills to profitable use. Your worth will also depend on how well you can identify and communicate it. This, of course, puts the responsibility on you to do some serious research, careful thinking and planning of a solid profit-based presentation to the employer. (I didn't say it was easy to be contrarian.) You must be able to compellingly present your case, and justify your claim to the compensation you think you deserve.
Mind you, I'm not suggesting that you be rude or confrontational. I believe the best way to say "no" to a salary history request is this: "I believe an [engineer's, sales rep's, accountant's, programmer's] value depends on his skills, but also on how those skills benefit a particular employer. Likewise, the nature of [engineering, etc.] work varies among companies, and I believe my compensation should be based on the specific job. I don't expect you to pay me more than I'd be worth to you. But I also don't believe that my salary history necessarily reflects what I'm worth on this job. I respect that you have a budget; I ask that you respect that I have a target salary range for this job. I'd like to spend some time with you discussing the work I'm prepared to deliver, and what that work is worth to each of us."
Explain "the policy".
You may find that uppity personnel jockeys (and some officious hiring managers) will still insist that you reveal your secrets. And that's where you draw the line with some officiousness of your own. A very smart Ask The Headhunter reader has offered up a shield — and it's impenetrable. His salary information, he politely explains, is subject to the confidentiality agreement he signed with his present (or past) employer. "I'm not permitted to divulge the terms of my employment agreement. That includes my compensation plan." Read your own employment agreement, or your company's employee manual, and you will likely find that certain information including salary is "company confidential". You simply are not permitted to tell anyone what your company pays you. Even bureaucrats understand that.
Regardless of how you protect yourself, the key to creating a rational compensation deal requires both you and the employer to step away from surveys and curves to focus on this job and on you. Sure, the employer may start by reviewing industry salary surveys, and you may do the same. But, these are statistical tools to help you both do your homework — not decision tools that limit your negotiations.
Don your flak suit.
From a purely financial standpoint, what matters in any job negotiation is the employer's budget and the job candidate's required salary range. What does your past salary matter, if you won't accept the job for less than $X?
(Yes, you can read between the lines and find that this approach is also useful when you're prepared to accept less than you've been earning and don't want the employer to know you're willing to take a cut.)
Your "required" or desired salary is the only salary information an employer should legitimately be requesting. It's doubly ironic, then, that many employers won't share the range they're prepared to spend.
Some employers will drop you from the running when you decline to provide that pay stub, or if you refuse to fill out the salary history form. In some cases, you will be rejected because of company HR policy. Other times, your stance will be viewed as confrontational rather than cooperative.
What I'm suggesting is contrarian and risky, and it could potentially brand you "a difficult candidate." But is it really so brazen to want to keep your salary confidential? Not when you realize that employers rarely share the kind of information they're asking you for. (Imagine politely explaining that you'll share your salary history if the employer will share the salaries of everyone in his department. In context, why would that be considered unreasonable, rude or confrontational?) What we're dealing with is convention, not good sense or good business. And changing conventions isn't easy.
Protect your worth.
Will you put a stake in the ground? I'm the last to blame you if you don't, especially if you presently don't have a job, or if you don't have other offers. But I want to encourage you to think hard about how a largely thoughtless hiring process can turn an otherwise engaging job opportunity into a one-sided negotiation where your leverage is limited by a piece of confidential information.
At the very least, if you decide to go ahead and provide your salary history, consider making a very firm statement of your required salary range. Then add that the employer won't want to waste his time or yours if he can't make an offer in that range.
When an employer places too much emphasis on using past salary to judge you, that's a cheap, unprofessional excuse for not taking the time to sit down with you to determine your worth. A real analysis of your worth requires cooperation and good faith. It requires an open, intelligent discussion about how your constellation of skills will profit an employer; and an open, judicious discussion of what a job is worth — not what you were worth to another employer.
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