We get mail at FOT! And you guys are facing some challenging issues out there. Here's a recent question from our mail bag that I liked and wanted to share -
Does anyone have thoughts about what to do when a candidate asks for a significantly lower salary requirement than you budgeted for? Do you just give them the lower amount out of hand? I have a candidate that I think is a good fit, but she low-balled herself, which makes me think a couple of things… times are tough, so she'll do whatever it takes, or she doesn't value her skill set (which is an undermining behavior)… or, does it mean she's maybe not as bright as I thought?
The quick and dirty answer from this gal's point of view is that there's a balance somewhere between 1) saving a little payola and 2) ensuring you're making an offer that is fair.
Internal equity comes to mind for me immediately. 
Save money in your salary budget – yes. I'm a capitalist after all. But, do show this person what they're worth, and do also make an offer that will be consistent with others who already work for the company and are in comparable positions. Because just think about it – what's going to happen if you do low-ball her and she finds out at a later point in time that her colleagues are being paid significantly more than her? Put your employee relations hat on and think about the resentment that may breed. (And we all know that employees do talk about their pay with each other. As much as we hate it, they do…) That doesn't mean you should pay everyone the same – but it does mean that you should be thoughtful and consistent in your decision making and consider all the above factors.
The question presented some additional complexities though that one might not pick up on at the surface. I wonder if you caught that the candidate in question was a she – a female. I would have confidently put money on the gender piece of the question had the writer not included that detail. Why? Because women ask for less. And women negotiate less. And for me, I think this is a piece of the puzzle when it comes to gender pay equality. Yup, really. And that's another reason not to completely low-ball the candidate and make a fair offer that represents what she's worth in the market, so long as it's within reason. Again, yes. Save yourself some money in your salary budget – that's totally awesme. But still, do what's fair. She might not ask for what she's worth because she doesn't know, or because she doesn't know how to ask… and this gal thinks it's partially our responsibility as HR and recruiting pros to not perpetuate a cycle where she's continually low-balled, because it's easy to low-ball her.
And while we're on the topic of the candidate low-balling herself? Besides gender, I do think there are other factors that could have come into play. The economy is an obvious factor – maybe she is unemployed at the moment and is willing to take a pay cut. Maybe she does want to take whatever she can get and doesn't want to lose consideration because her salary requirements are too high. Regardless of the reason that the candidate is low-balling herself, I'd say this is about balance. Save your company some money but give the gal what she's worth because both are the right things to do.
What would your two cents be?
I remember when I first got in the business, it was during another, albeit smaller, recession. I was working third party, and I had customers tell me that when making an offer to an unemployed candidate, they would offer a salary 10% than there prior salary for each month they were unemployed. They actually felt it was fair to offer someone who had been making $50,000 $25,000 if they had been unemployed for 5 months. Their logic was if they were any good at what they did, they wouldn’t be unemployed.
This always boggled my mind as being short sighted and small mind thinking, and I refused to send any canididates, employed or unemployed to these customers.
I prefer to be a realist, when you low ball someone, because you feel you can get away with, you are setting yourself up for failure. Instead of hiring someone who will give their all to your organization, you really wind up subsidizing their continued job search. You think you’ve been benevolent in giving them a job and provding them with at least some income, and they should respect you for that? What ever happened to the Golden Rule? Is that how you’d like to be treated if the shoe was on the other foot, Mr. or Ms. Hiring Manager? The reality is that most people do not live within their means, they live pay check to pay check, and your low ball offer creates a short term temporary solution to your new hires problems. If your cool with that, just hire a temp next time.
Now, I do understand that folks that are transitioning between careers should not expect to earn the same in their new career right away. If you were an engineer for 15 years and now want to be a graphic designer, your entry level now, and should no that, but that situation is an exception.
I have been both a Corporate recruiter and I am currently recruiting for a vendor. I agree totally that you should save dollars but it can bite you if you lowball too much. Pay equity in a department is so important for the reasons you bring to the article but also it is the “right” thing to do for the company. Also, if you are involved with OFCCP or any other regulations and you get audited it can cost your company MUCH more that paying someone what they are worth!
A worst problem I have seen in this economic climate is that management seems to think they can get a “bargain” and want to low-ball everyone. I am a Technical Recruiter; there are candidates that I work with that do not need to take a lower salary because of skills they have and demand so it becomes a “teaching moment” with managers who feel they should get a “bargain”.
Great Article
I was out of work for 5 months last year and I was always hesitant to ask for what I felt I was worth. I wanted $70-80K but knew if I didn’t find something soon I could end up at Best Buy on the Geek Squad making considerably less. Suddenly, making $50K sounded pretty damn good.
If, for example, the candidate above is asking for $40K and the range for the position goes up to $60K, I would probably pay her $50K and then give her a generous raise after her first review (assuming she is working out of course). She’ll be thrilled to get more than she asked for and she’ll be thrilled again to get rewarded for doing a great job. The employer saves a little money the first year and then gets a happy, loyal employee after showing they appreciate her effort. If the candidate turns out to be weak or only does the bare minimum, then the employer can at least be satisfied they didn’t pay her top dollar.
If an individual really wants to make what they are worth then they should become a Consultant or start their own Business.
Anytime you give up power and independence to another for security you have to pay for that security and that pay is in the form of lower income.
Employers are also fearful in at this time in that there are more people applying for jobs they are not qualified for which is why there are a lot of 100k plus jobs even in this economy that have been open for months. The people applying for the jobs are just not qualified.
If you are the best, want to be the best, and make as much as you can and what your really worth. Start your own business or three.
Leaders do not follow, leaders are willing to do what unsuccessful people will not which is why most leaders own thier own companies.
http://www.powercareernow.com/
Jessica,
This is a hot button issue for many of us in recruiting. We tend to be the ones stuck between a rock and a hard place. We want to make the hire clean and good. Our masters who control the salary purse strings don’t have that attachment to closing the deal as much as they do in cutting costs. And they drive this activity. When we are negotiating salaries I find that there usually little room to move if you want to pay a fair wage. A fair wage is one as Jessica mentioned meets employee parity, market rates, etc.
If you are a ruthless employer and turn business equations into cost benefit analysis, let’s take a look. Paying a fair wage keep workers happy and productive, breeds a healthy environment as employees see the employer as fair and just, and promotes a merit based reward system. People will work harder when they know the compensation is based on implied efforts and not the whims of the current economy.
My concerns with low balling is, as others have said, the employee will use your job to interview for their next job. They will not be engaged or as productive. You make create legal exposure if the person you are paying less is in a protected class. Their manager will struggle for them be productive and that will create even more HR hasseles and resentment. Who needs those headaches?
Balance that against the costs above and it becomes clearer that your costs go down if you compensate in a way that works.
Once someone starts working their sense of desperation is gone, they can eat and pay their bills. Their spouse and children are happier the moment that first paycheck comes home. And those feelings of gratitude to have gotten the job will fade away. Humans have an uncanny ability to let go of how painful something was, good thing too.