How to Effectively Discuss Pay During the Hiring Process
The Growing your Team Podcast: Episode 152
We have been conditioned to think we should avoid discussing pay unless absolutely necessary. This often leads to business owners not being sure if and when they should discuss pay during the hiring process before presenting an offer.
The reality is, pay absolutely should be discussed during the hiring process, and the earlier, the better.
Learn why it’s vital to discuss pay during the hiring process, how to avoid questions that can lead to legal troubles, and a few simple and easy ways to bring the topic of pay into the hiring process.
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This podcast episode transcription might be edited for clarity and conciseness.
Hello! Jamie Van Cuyk here, and welcome back to the Growing Your Team podcast.
Today we’re talking about how to discuss pay during the interview process.
This is before you make an offer so you can determine whether one is a candidate even in your price range and, two, what they are expecting in terms of an offer. This allows you to best prepare yourself when you go to present an offer to a candidate.
00:02:13 – Why you need to discuss pay during the hiring process
Pay is one of those uncomfortable subjects. We’re conditioned not to really talk about pay, but when you’re hiring someone, it’s an important part of the process.
Eventually, when you go to hire someone, you are going to pay them. You are going to offer them a set salary or hourly rate, so pay is a part of the process. But sometimes, we’re so afraid to talk about it before an offer is presented. And then what happens? Sometimes we go to offer a candidate the position, and they turn it down because of pay. Sometimes this could be because they received a better offer while going through the process, but other times it’s because they were never in our pay range to start.
And one thing that we have to recognize is that while people want to make more money, a lot of times, there is typically a minimum they can take. There is that floor where their pay needs to be in order for them to continue with their standard rate of living. In order for them to continue paying their mortgage, continue paying their necessary bills, and everything that is needed to survive. So we have to look at candidates needing a certain pay level, not as being selfish, but as being that they are trying to maintain the lifestyle they’re accustomed to. Or that they know they’re worth and know that they are capable of getting that pay, and they’re going to stick out until they get the right offer.
We don’t want to get all the way through the interviewing process and then find out that a candidate was never capable of accepting a job from us because we cannot pay the rates that they are seeking or that they need.
00:04:13 – How to avoid legal troubles
So how do we prevent this? How do we properly talk about pay during the interview process so we know if a candidate can even potentially accept an offer but also do it legally? And that’s a big thing we need to make sure we talk about pay legally, so you don’t get yourself into trouble.
Let’s talk about the legal steps first because it’s very important. No matter what stage it is in the process, avoid asking a candidate how much they currently make.
Now, as we go through talking about pay, a candidate might tell you what they currently make, but we cannot ask what they’re currently making.
In most states, it is illegal to ask candidates what they’re currently making.
Why are there laws to prevent you from asking a candidate what they are currently making? It is because employers used to use this to then say, “Well, my range used to start at $75,000, but you’re currently making $50k, so I know I can pay you $60k, and you will be happy. I don’t have to pay you as much as if I was hiring somebody else for this role.” As a candidate, if you didn’t know that their original floor of the pay range was $75k and you got an offer of $60k, and it’s $10,000 over what you’re currently making, you’re going to see that as a good bump and not necessarily realize at first that your new employer is taking advantage of you.
00:06:09 – Why these laws are in place
What happened here is typically, women and minorities were being paid less for the same work. So when they would go to get new jobs, it would be this facade of they’re being paid more. They would feel that they’re getting raises, but because they were getting a pay rate compared to what they were currently making and not what it was appropriate for that job, they tend to still make less in that new role than, for example, a white man because that white man was already making more at their current job. So when the white male gave their current salary, this new place knew that they needed to pay him more in order to attract them to their company. So, it helped contribute to the pay disparity that we see a lot of the time in the workforce.
The laws were in place to say you shouldn’t be paying someone for this job based on what they’ve made before. You need to pay someone for this role based on the role and based on the experience and skills that they’re bringing in. That should be the same no matter what they’ve been making before.
That is why you cannot ask a candidate how much they currently make, and even if it is currently legal to ask that question where you live, I advise not to do it.
But there are other ways where pay can be discussed in the process, so that way, once again, you don’t get to the end and you feel like you got your perfect fit candidate, you’ve found your Unicorn team member, and then have them turn down an offer because you’re like $20,000 off on pay.
00:07:50 – How to properly discuss pay during the hiring process
So how do we do this? How do we make sure that people are aware of our pay range and that we are also aware of whether they fall within our pay range?
The first step, as we talked about back in Episode 128, is you should always be posting the pay range on your job posting. Now once again, in some places, it is now required by law for you to post the pay range on your job posting. That is not a requirement everywhere yet, but my advice is you post it.
Why? One, it creates transparency. Candidates will feel more comfortable when they know what type of situation they’re entering. And two, if candidates are actually really reading the job posting, they can see and make the decision before they apply whether the posted range is something that they would consider taking or not.
But that’s not the last thing that we should do in the process. Some candidates choose not to look at the posted range, and other candidates think it’s more of a suggested range and that companies have budgets to negotiate. And chances are, as a small business, you don’t have a big room for negotiations. Your range is typically all you can afford for the position or all you feel comfortable paying, but candidates don’t necessarily know that. So if you post a range that set that is, let’s say, $25 to $30 an hour, they might look at that and say, “You know what. I could possibly get them to stretch it to 32 or $33 an hour,” so they’re going to take a chance.
00:09:34 – What are your salary requirements?
So step one is to post it out there for people to see while they are applying. But once again, candidates might still apply, or they might choose to ignore that information. So what can we do next?
During the first interview with a candidate, we want to explore the possible match between our salary range and their salary requirements. And how do we do this? There’s one of two ways that I suggest doing this.
The first, and this is what we here at Growing Your Team follow most often, is we ask the question during that first interview, “What are your salary requirements?”
Now a few things might happen here. One, a candidate might choose not to give you that information. They might choose to withhold any numbers and not want to talk about salary yet. That’s perfectly okay. And that’s when we ask if the posted range meets their needs.
The other thing that might happen is a candidate might give you a range that is outside of your range. If that happens, we ask the question, “The range for this position is between X&Y. I want to respect your time, and if this is not a salary range that you can accept, we can go ahead and end the interview now.”
That way, the candidate can decide, do they want to stay in the process now that they know the range? Or do they want to exit?
That’s why we say to ask this question pretty early on in the interview. You don’t go through a whole interview to find out on the last question that they’re out of the range and that there’s no way they would be considered taking the position. You don’t want to waste your time or theirs!
00:14:17 – When a candidate is below your range
The last thing that can happen is that a candidate will either tell you that they are within range or even sometimes below. Those are good things. That means you are safe to move forward with the candidate.
If a candidate gives you a range that is below your range, do not lower the pay to be in that range. Be ethical to what you posted for the position. Do not be that boss that is a cheapskate and think you can get away with paying someone less than you would for someone else in this role.
So, if someone tells you that they’re expecting $50,000 and you were originally going to pay $55k to $60k, make sure you offer them at least $55k because you posted it as the range. Don’t lower your pay because you think you can get away with a cheaper employee. It will not work out well for you in the long run, it’s not an ethical thing to do, and it builds a lot of mistrust if they ever go back and see the posted range.
00:15:12 – An alternative method for discussing pay during the interview process
The other way you can approach the salary conversation, without asking someone what they’re currently making or if you don’t feel comfortable asking someone about their salary expectations, is simply asking the question, “The pay range for this position is between X and Y. Does that fit your salary requirements?” This allows the candidates to simply say yes or no.
00:15:42 – When you get a lot of candidates that are out of budget
With one of the positions that I’ve been helping with recently, I identified that there were actually quite a few candidates that were coming in and getting into that interview that were pretty significantly over the pay range. To the point where it didn’t matter how great they were, I didn’t feel comfortable moving them forward because they were $20,000 over the range – and we’re talking that this range was at a place where $20,000 was almost a 30% overage for the budget.
Because this was happening pretty frequently, I added another step in the process to bring up the pay information before we got onto the interview. I added this step because I wanted to once again respect their time and also not take more of my time to interview candidates that were never going to be moved forward to my clients.
What we did here was we put out the pay information when we were contacting them to schedule the interview. I wanted to make sure it was a guarantee that they saw this information and that they knew what the pay range was before they got on an interview.
We use Calendly to schedule our interviews, and when they enter their contact information, we put a required question to ensure that they are aware of the pay range and asked if it matched their requirements. The options that they could select were yes, no, or depends on the entire benefits package. That way, it would stop a candidate from scheduling an interview if it really wasn’t an appropriate range for them, and hopefully reduce the amount of people that we spent talking to that we’re never going to move forward in the process.
00:18:26 – One final way to discuss pay during the hiring process
Another thing that you can do in the process is making an unofficial offer to a candidate. And I’m not saying do this to kind of like test the waters and see who you should make an offer to. This should be your final candidate you’re going to make an offer to, but you could have a conversation around the offer you’re planning on presenting. Does it fit their needs?
Especially if it’s a candidate that you think is or would prefer to be slightly outside of your range, it’s okay to talk about pay before you present that final offer. Let them know that you are planning on presenting an offer, that this isn’t the official offer yet, but you want to properly prepare for it and see what they say. Let them tell you. They might say that they need some time to think about it, but you can get some information from them before you make an offer.
Otherwise, once you get to that point in the process, make an offer, see what happens, and then be ready to negotiate.
00:19:39 – Tips for negotiating pay
My biggest tip about negotiating a job offer is always be prepared with your negotiation limits before you go into that conversation.
The one thing you don’t want to do is end up paying a candidate more than you should be paying them. And this doesn’t necessarily mean more than their value, but more than you should be paying them in terms of what you can afford as a business. Sometimes what that position’s value is within your organization is not necessarily what that individual’s value is, but what the position’s value is within your organization. When you go over that value, you tend to sometimes have resentment, or you could start bleeding money that you don’t have to keep this person on your staff.
You want to know what your limit is so that when it comes to negotiations, you stay within that limit.
For example, $30 an hour is your cap, but because of this person’s experience, you want to go in and present them with $28 an hour. Know that if negotiations come up, your cap is $30, and that’s as high as you can go. If they need, for example, $32 an hour, you are going to have to say no. But when you think about it ahead of time, and you set that cap ahead of time, it then makes it, so you don’t get swayed by them during the conversation. You prepare yourself to know when to say no.
00:21:20 – It’s okay to discuss pay during the hiring process
All right, so that wraps up today’s conversation on how to discuss pay during the interviewing process. It’s okay to discuss pay during the interview process, and it’s one of those things that I think you should do so that way you don’t fall in love with the candidate that you can never afford. Just make sure you’re doing it right. Approach the conversation in a way that makes it known that you want to make sure it’s a fit for both sides, that you value their time, you respect them as a candidate, and that you want to make sure that what they need is what you can afford.
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