Should I accept a job offer with a salary cut?

Should I accept a job offer with a salary cut?

In the February 25, 2020 Ask The Headhunter Newsletter a reader asks whether it’s possible to recover after accepting a job offer with a salary cut.

Question

salary cutI’ve been unemployed for six weeks. Was earning around $120K. Have been offered a position at $85K and, quite frankly, I need the money. Even more important, I recognize that my self-esteem is too bound up in my career: I need to work for more than just the money. Am seriously considering accepting this lower offer, because I believe these folks cannot afford to pay more. Will my chances of negotiating another position at a higher salary be irrevocably damaged if I accept a salary cut? Advice, please, and thanks in advance.

Nick’s Reply

You’re facing an important decision, and you need to be sure you are balancing the key issues. How long can you afford to go without a job? If you accept this offer, how much time will you be able to devote to continuing your search for one that pays better? Will being under-employed versus unemployed affect your self-esteem?

(And consider this: Is it possible to get more money out of a company that “cannot afford to pay more?” We’ll get to that at the end.)

What’s your objective?

I could easily tell you not to give in yet, and that it would be smarter to continue your search until you find a job where the pay is more in line with what you’re accustomed to. Six weeks is not a long time to find the right job. But being able to pay the bills is just as big a consideration. You could borrow to meet expenses until you find something better — but how would that affect your motivation and effectiveness in interviews?

These are very personal questions that only you can answer, and I think they are more relevant at this point than the main question you’ve asked: Will a salary cut damage your ability to win a higher salary later? While it might seem penny-wise and pound foolish to focus on the short-term problem (paying the bills), there’s something to be said for surviving today so you can stay in the game.

It’s important to think about what your objective really is.

Why a salary cut?

In today’s business climate, radical corporate restructurings and the outsourcing of jobs to “consulting firms” seem to be killing wages and salaries. While economists consider it a minor footnote and blow it off, stagnant wage growth tells us something is very wrong. Seemingly low unemployment suggests pay should be going up — but it’s not. This is for another discussion, but it seems the U.S. Department of Labor may be misrepresenting the impacts of masses of uncounted people who are returning to the labor market. I could make the argument that there is no talent or labor shortage; that in fact, we’re in an unprecedented talent glut. That’s why employers think they can hire you even with a salary cut.

There are a lot of good people on the street. Some employers are capitalizing on this by hiring great workers cheap. But this is no more of an ethical problem than you accepting a low-paying job while continuing your job search — and then quitting for a job with more pay.

(Is it ever worth taking a salary cut, other than because you need the money? I see one possible benefit, if you look at it as a re-tooling investment. A lower-paying job might be the price you pay for an opportunity to gain a foothold in a new field or business, and to learn new skills.)

Are good salaries dead?

While some employers are buying talent at a discount, others are smarter. They don’t assume that because you took a pay cut at your last job, you’re now worth less. They see an opportunity to land a great new employee who might not have been available to them otherwise at any price. (See Dr. Dawn Graham’s insightful article: The Salary Negotiation Mistake That’s Costing You.)

I know one very rare HR manager whose policy is to offer candidates what they’re really worth. If they are truly under-paid, she helps get their compensation back on track, and earns the new hire’s loyalty. Good salaries are not dead. (See Why employers should make higher job offers.)

So, no, I don’t think your chances for more money will be irrevocably damaged — not unless you become complacent. You must continue your job search if you take this lower-paying job. If you stay in the $85K job too long, you could indeed hurt yourself long-term.

Encourage better job offers

As you continue to search while newly employed, you must learn how to negotiate from a position of strength — even if the employer says it “cannot afford to pay more.”

  • Never disclose what your current salary is. It’s none of their business. An employer will always use your current salary to negotiate against you. See We need to know your salary because —.
  • Ask the employer what the salary range is before you agree to interview. Don’t fall into the trap of interviewing for jobs that won’t pay enough. You’re likely to rationalize accepting another low salary simply because you invested so much time in it.
  • Assess the value you could add to any new job you’re considering. Can you do it faster, more efficiently, more profitably than the employer expects? Couch your salary expectations in terms of what you will bring to the employer’s bottom line. Be ready to explain it.
  • Choose higher-paying jobs and, for each one, prepare a mini business plan that demonstrates clearly why you’re worth the money.

What counts most in any job negotiation is what positive impact you’re offering to an employer’s bottom line. That’s what wins you more money. Focus on conveying that critical message to an employer, and you’ll always be able to negotiate for more money — with a current employer, or with a new one.

Have you accepted a job with a salary cut? Why? Were you able to regain your higher salary level? How? What should this reader do? Do you believe salary cuts are more likely in today’s job market?

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Want a signing bonus?

Want a signing bonus?

 

How a Signing Bonus Can Take Your Recruitment Efforts to the Next Level

Source: Anthem: The Benefits Guide

signing bonus

The majority of companies — 74 percent, to be exact — give bonuses to at least some of their new hires, but amounts vary widely depending on the field. Signing bonuses usually come in the form of a lump sum given at the start of a new job. Unlike a relocation payment, there are no strings attached to how the employee may use the money. A bonus isn’t a magic recruitment wand, and it’s not meant for every circumstance.

Here are three situations, however, where a well-placed bonus can help bring in a new hire.

 

Nick’s take

My good buddy Suzanne Lucas (the infamous TheEvilHRLady) offers a good primer about signing bonuses. Written for employers — it’s an insider’s view! — this article explains what a signing bonus is, what it isn’t, and why companies grant them to job candidates. Signing bonuses aren’t just for executive-level jobs. Don’t try to negotiate your next job offer without understanding how you might score a lump-sum signing bonus!

What’s your take?

  • Have you ever gotten a signing bonus in your job offer? How much?
  • Did you ever have to return a signing bonus because you quit too soon?
  • If you’re an employer, when and why do you give signing bonuses?

 

 

 

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What are stock options worth in a job offer?

In the November 13, 2018 Ask The Headhunter Newsletter a reader asks whether to accept stock options as part of a compensation package.

Question

stock optionsI’ve been with the same company for five years, with total 18 years’ experience. I’m considering an attractive offer from a year-old start-up financed by a very respected venture capital group. The offer includes stock options. The idea is that someday they’ll go public and will be hugely successful, or someone will buy the company, and we’ll all become rich (on paper).

My question is, how would I go about putting a value on the stock options offered? Understanding the risk I assume, what should I negotiate for? Any suggestions?

Nick’s Reply

Venture funding for start-ups by respected venture groups is slowly picking up after a lull of several years – and that’s a good sign for the economy. But don’t count any stock options before they hatch.

There are as many subtle variations on evaluating options as there are start-ups. You could do well, or you could wind up very disappointed.

I’ll offer you two simple rules of thumb. There is no finesse in this. It doesn’t even involve calculations; just a blunt point of view that I’ve developed as a headhunter during many years of dealing with people who’ve faced this situation. A very few have profited from options, but most haven’t.

Stock Options: Rule 1

The first rule is that the factors which influence a start-up company’s success or failure are unknown to you at this point, and you have virtually no control over them. More important, to varying degrees we can say the same about the founders of the company and those who are funding it.

  • Thus, any attempt you make to rationally analyze how much start-up stock to hold out for — or to estimate what that stock is really worth today or in the unknown future is a crapshoot.

Stock Options: Rule 2

Here’s my second rule:

  • All stock options in start-ups are worthless by definition because you cannot put a value on something you cannot sell.

How to think about that job offer

Now for my advice, based on those two rules:

  • Accept the offer only if the work and the compensation package without the options would make you take the job.

How to negotiate the job offer

Negotiate for all the stock options you can get. But beware: A company is not likely to give you more options than it has already decided on. Management has thought about this more than you have, under the guidance of people who put up their cash to start the business. Unless you would be a key employee whose expertise would have a key impact on the company’s chances of success, you probably don’t have much leverage to negotiate options.

Now here’s the most important thing to take away from this discussion:

  • Negotiate harder for salary, bonus, incentives, commissions and allowances, and consider the stock options a lottery ticket.

This is what will keep you truly motivated day in and out. While I understand when a start-up’s founders say they want employees who are truly motivated to “throw in with us and take a risk,” you must decide how much of a risk you can afford to take — and whether you’re willing to give up part of your own market value today (cash compensation) for a chance to hit it big later.

Talk with a lawyer

No matter what they put in your job offer, a startup is a special situation because the risks are different from those in a mature company (even a small one). That’s why you should talk with a lawyer to get your job offer reviewed before you accept it.

These Ask The Headhunter PDF books will help you with the compensation end of a job offer:

Fearless Job Hunting, Book 6: The Interview – Be The Profitable Hire. This works even when discussing salary with your current employer.

Fearless Job Hunting, Book 7: Win The Salary Games (long before you negotiate an offer), especially “The Pool-Man Strategy: How to ask for more money,” pp. 13-15. Sometimes it helps to ask casually.

Fearless Job Hunting, Book 8: Play Hardball With Employers, especially “Due Diligence: Don’t take a job without it,” pp. 23-25. This is a must when considering a job at a start-up, though this section applies to established companies, too.

Fearless Job Hunting, Book 9: Be The Master of Job Offers, especially “Non-Compete: Did I really agree to that?”, pp. 5-7.

This article by my own attorney will highlight some of the issues you should consider: Employment Contracts: Everyone needs promise protection.

What’s your tolerance for risk?

Here is a sobering question to test your tolerance to risk in this situation:

  • If you had a chance to buy into this start-up without working there, would you buy its stock today?

If you wouldn’t invest in this start-up as a bystander, why would you take part of your pay in stock?

No matter how many options you get, if the company strikes it rich, I guarantee you’ll look back and think, “I knew I didn’t get enough options when I took this job!”

If the stock winds up worthless, you’ll be glad you were doing work you really wanted to do, and getting paid a nice package in the meantime.

Have you ever taken stock options as part of a job offer (with a start-up or otherwise)? How did it turn out? How did you negotiate the details? How would you advise this reader?

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13 lies employers tell about job offers

In the October 30, 2018 Ask The Headhunter Newsletter a reader recounts her experience with a small-business owner and how he plays games with job offers.

Question

job offersI just came across some of your articles when trying to research my job offer being rescinded (Behind the scenes of a rescinded job offer, Job offer rescinded after I quit my job). A lot of what you wrote resonated with me and made me feel much better about my experience today.

I interviewed for a high level position at a smaller company, so I was talking to the owner directly. Here are the key facts about the compensation:

  1. The offer was at the bottom of the salary range discussed during my interview process.
  2. The owner said I could make it up with a large bonus, but that they didn’t have a structure for how bonuses worked. If the company was doing well I’d get all or part of the bonus, but it was at his discretion.
  3. I asked if he was flexible on the base pay at all, and I brought up the industry average (which was a lot higher) and my experience level and what I could bring to the table.
  4. He first said he was flexible on the base pay and even said that what he was paying me didn’t matter to him, but he didn’t actually budge and said this was a good offer he was making me.
  5. He said I needed to trust that I would be getting the bonus and at the end of the day my pay would be much higher.


I said I was still very interested and excited about the role. I explained that I would really like to review the details of the whole package, including the benefits, in case I had any questions. It’s a small company and there were some non-standard things they were doing with benefits, like providing some kind of stipend for your cell phone and other things, but no 401(k).

Here’s how that discussion went:

  1. I asked if he could send the complete offer in writing so that I go over all of it to make sure I understood everything, and then confirm my positive response.
  2. He asked how long I needed to review it.
  3. I asked if I could get it to him before Friday (this was on a Tuesday).
  4. He sounded disappointed. He said that wasn’t the response he was expecting but he would still send over the offer in writing.
  5. He said he had other candidates that he needed to inform who weren’t getting the job and it was not fair to them to make them wait 2-3 days until he got a confirmation from me.
  6. I asked him if he had a timeline in mind that would work better for him, so he said Thursday morning.
  7. I said okay.


That evening, I got an e-mail saying he was rescinding the offer. He said he wanted someone who was so excited about joining his company that they are prepared and anxious to accept the offer when it’s made verbally.

He said that he felt I lacked passion for his company and that he didn’t want anyone there who was not passionate about his brand.

I wrote him back a professional response thanking him for everything.

I felt very validated when I found your articles because you explain that employers often make verbal offers because they are merely fishing for a reaction, not actually making a bona fide offer. That’s exactly what this was.

The job is an analytical one, so I was surprised that they would expect an instant, seat-of-the-pants response when they were looking for a detail-oriented, analytical person!

When I told my friends what happened, they fell into two camps. All my friends who work at various levels in corporate environments (including HR) thought I did nothing wrong. Two of my friends who both own small companies agreed with the owner and said they, too, would have rescinded the offer because they felt it was insulting to not immediately accept the verbal offer. They said that asking for the offer in writing showed I lacked trust. This of course goes against everything I know and believe.

I see what happened as a red flag for how I may be treated in the future. I’m at a bad job now but I don’t want to go to another bad job. I’m interested in this divide between large companies and small business owners, and I thought you would be, too.

Are the negotiating rules really different for small companies versus larger ones? Or are the small business owners I’ve described just outliers? Thanks for your comments.

Nick’s Reply

I think you dodged a bullet. Your story is important because it highlights a raft of games employers play with job offers.

Are these problems particular to small companies? While I can’t offer data to support this, my experience suggests small business owners are far more likely to play these games than managers in larger companies. I think business owners tend to be far more autocratic than their peers in companies that have many owners or investors.

Strike One

Let’s look at the facts you presented above — #6 through #9. This business owner decided to extend an offer after you satisfactorily negotiated a more-than-reasonable decision deadline. He made a verbal agreement with you about the deadline. Then he reneged on what he agreed to.

That’s strike one against him. It tells us he can’t be trusted.

Strike Two

You prudently asked for details of the offer in writing. He hedged, then agreed. Then he reneged and never provided anything in writing. I think he never had any intention of giving you a written offer.

This is different from merely agreeing to a decision timeline. This is about reneging on putting terms in writing. Do you think he does business deals on a simple handshake, without anything in writing? That’s a rhetorical question but, of course, he may in fact do deals with nothing in writing.

Either way, that’s strike two.

Strike Three

After tactful questions from you about the salary and bonus structure (#1 – #5), he refused to commit to anything concrete. He wants you to trust him, but he doesn’t trust you. He uses a double standard.

The old rule about “trust but verify” is why we put agreements in writing. I’ll repeat: This guy had no intention of putting anything in writing. “Trust me” means “No.”

Strike three.

Strike Four

The egregious management error this employer committed was to judge you unworthy because you failed to instantly display passion and a sucker’s excitement for an incomplete, dishonest job offer. He lost a potentially great hire.

If a strike four could be counted, that’s it.

If he wants to hire a foolish employee, he’s talking to the wrong person. If he’s looking for a thoughtless worker whose decision-making process is marked by a lack of prudence and due diligence, he should absolutely move on to another candidate he can lie to and hire on the spot.

The lessons from this game

It’s a good sign when an employer engages in a negotiation with a job applicant on compensation, on the terms of the job, and even on when a decision is due. It suggests you’ll be working for a boss who values your input and your circumspection, and who wants to make working together a win-win experience.

It’s a bad sign when an employer plays games.

You’ve taken the trouble to share your experience in very useful detail, revealing the many games employers play with job offers. This guy is bold enough to play them all at once — then to blame you for catching him.

Lies employers tell you about job offers

These are some of the lies employers tell, presented as a sort of “dictionary.” Here’s what unworthy employers will do in the hiring process:

  1. Salary Range. Establish a salary range to set ground rules for proceeding with interviews, then they pretend the low end is going to impress you.
  2. Good Offer. Tell you it’s a good offer without showing you exactly what the offer is.
  3. Competitive. Refer to “competitive” pay and benefits but never to precise sums or specific benefits.
  4. Bonus Structure. Refer to contingent forms of pay — like bonuses and commissions — but do not define objective, measurable, agreed-upon criteria that you must meet to earn those bonuses.
  5. Flexible. Say they are flexible on pay, but make no explicit compromises or concessions about pay.
  6. Industry Standard. Talk about industry-standard or average pay, but don’t define what that is or cite the sources of those numbers.
  7. Opportunity. Suggest that what this deal is really all about is a great opportunity for you, and that pay isn’t really the issue to them, when it clearly is because they won’t negotiate pay with you candidly.
  8. Trust. Tell you to trust them to pay you fairly, but will not define the compensation deal objectively in writing — or trust you to review their offer.
  9. Terms. Want you to agree to accept a job offer immediately based only on a few points — and “don’t worry about the rest of the details,” or what lawyers refer to as “terms.”
  10. Job Offer. Want you to commit to a deal verbally, while they balk about putting it in writing with their signature on it.
  11. Decision. Agree to give you two days to review a written offer they haven’t given you yet, then renege because you insulted them by not deciding instantly.
  12. Qualified. Judge how qualified you are for the job by whether you’re “excited” and “passionate” enough to accept on the spot.
  13. Commitment. Negotiate terms and make commitments then violate them.

These are all lies unworthy employers tell job applicants they try to take advantage of. The words in the little “dictionary” above actually mean something to good employers — and you’ll see that instantly in a good employer’s behavior.

Never work with jerks

You should never go to work for employers who play these job-offer games. You’d regret it because they’d behave the same way day-to-day. They’re jerks.

I think you’ve identified at least three people you should never work with — including your friends who said you insulted the employer and displayed a lack of trust. Don’t doubt your judgement – it has certainly served you well here.

Whether you’re talking to a big or small company, the approach and questions you relied on here will tell you all you need to know about an employer.

From the details you shared, I see a prudent, honest, forthright, responsible professional who treats others the way she wishes to be treated. I see no fault in anything you said or did during the hiring process. In fact, I compliment you for doing everything right – it all combined to help you dodge a bullet.

On to the next! Find a company that deserves a good hire.

My only suggestion is to carefully check a company’s and manager’s references before you invest your time interviewing there. You might find this useful: 5 rules to test for the best job opportunities.

What lies have you heard employers tell job applicants? What would you add to the dictionary above? What else should job seekers look out for in the throes of getting a job offer? What details do you insist on having in a written job offer?

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The Cardinal Rules of Worth

In the March 27, 2018 Ask The Headhunter Newsletter, a reader asks us to focus on the big questions of value and worth.

Question

worthI’ve read your many columns about how to negotiate salary, how much to ask for when applying for a new job, what not to say about my salary history, and about why salary surveys (and websites) aren’t to be relied on. Now I’m doing some introspecting, trying to look at the big picture of my value and what I’m worth in the world. I wish I had started thinking about this 15 years ago.

Do you have any big-picture suggestions about figuring out what I’m worth and about how to increase my value in the world? Know what I mean? Not just salary and money, but value. Thanks.

Nick’s Reply

Anyone can use the search box at the upper right of this page to find articles about “salary,” “pay,” “negotiate,” and other such topics. We’ve discussed all that a lot. I think there’s good advice in the articles that will turn up — and even better advice from readers in the comments of each one.

For example:

Worth: The big picture

But I like your big-picture question. It does indeed demand some introspection and even some chewing of the philosophical fat. It really is a big question: What am I worth?

Maybe even more important, How can I be worth more?

And you’re right — this is something to think about again and again, not just when considering a job offer or negotiating salary. I typed “worth” and “value” in the search box and realized I’ve never tackled those tough topics directly — though I’ve wanted to.

Value: Who says?

I think the big mistake people make is that they try to view their worth, or value, in absolute terms. That is, they think there’s a number — a certain amount of money, or a money range — that they deserve based on their experience, credentials, knowledge, skills and so on. (See Too rich to land a job?) I suppose there’s an argument to be made that we each have some kind of inherent value that employers should pay us for.

But I’ve never bought into that. I think value and worth are in the eye of the beholder. It’s why sales people exist! Their job is to make something they’re selling seem more valuable to you so that you’ll pay more to get it.

When it comes to jobs, it seems employers, the job market, government labor and economic data and — of course — job boards and job-related websites, all want to tell you what you’re worth. They think they can figure it out by interviewing you — then they expect (demand?) that you accept their judgement.

Is your head spinning?

Maybe worse, employers define the value of a job by… defining the job. Then they limit themselves to hiring only someone who fits the job definition rather than someone who can do other, unexpected stuff to make their business more successful! This begs the question, are employers advertising for a bag o’ keywords, or for desired outcomes?

All this can make your head spin. Each issue I brought up above is probably worth (ha-ha) an article and a long discussion (and loads of comments!).

The Cardinal Rules of Worth

So now I’m going to try to do what you asked. To introspect. To focus on the big picture.

Here’s my stab at what worth is and how we can increase it, and maybe it’s too ambitious. But I’m worth more when I’m ambitious…

The Cardinal Rules of Worth

  1. Know who you are and be that. Don’t try to be someone else.
  2. Increase what you are good at. Don’t envy what others can do.
  3. Produce something. Don’t just consume what others make.
  4. Learn the market value of what you have to offer. Don’t settle for less.
  5. Assess your assets regularly. Know your trading power.
  6. Trade some of your assets for what others produce. Always exchange for equal value.
  7. Seek value, not availability. Don’t take what comes along.
  8. Create desires in others. Give others a reason to trade with you.
  9. Invest in the abilities of others. They will make your life bigger.
  10. Earn respect. It will increase your worth.
(c) Nick Corcodilos 2018 | asktheheadhunter.com

I think when we consider big ideas, there really aren’t any answers — just big stuff to think and talk about. And we all know the purpose of this forum is for us all to think and discuss. So I expect everyone will have something to add and something to say.

What is worth? Value? How do we judge and grow our worth in the world? How do we benefit from the worth of others? In what ways can we express our worth (rather than our desired salary!) that will make it relevant to others (and worth paying for)?

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The Job Monopoly: How companies keep pay low

In the January 23, 2018 Ask The Headhunter Newsletter, we take a look at the job monopoly that keeps a lid on pay.

Question

job monopolyYou’ve probably already read this on Slate. Three economists conducted a study that asks, Why Is It So Hard for Americans to Get a Decent Raise? (The paper is only in draft form so Slate includes no link to it.) I think your readers might have some interesting things to say about whether there’s a job monopoly that controls their pay.

Here are the key points:

  • “Workers’ pay may be lagging because the U.S. is suffering from a shortage of employers.”
  • “A lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay.”

In other words, in areas where there are only one or two companies posting a certain kind of job (e.g., delivery van drivers in Selma, Alabama), pay for those jobs has stagnated or declined. They call this monopsony. Like a monopolist that controls prices because it controls supply of a product or service, a monopsonist company controls pay unfairly because it controls the supply of certain jobs.

But I think it’s far worse. (You’ve already touched on this before in your article Consulting: Welcome to the cluster-f*ck economy.) I wonder if those economists are taking into account all those “consulting firms” — middlemen who provide, say, most of the computer programmers to several employers in an area — that create further aggregation of hiring entities who would otherwise be competitive.

What do you say about this? What does everyone on Ask The Headhunter think about it?

Nick’s Reply

Wow, that’s one cool new word for our vocabulary: Monopsonist. It opens up a whole new world of worry!

Consulting firms and the job monopoly

I don’t think there’s any question that a handful of “consulting firms” that funnel workers to lots of companies in a particular industry, field or discipline constitute a job monopoly that kills competitive pay. I suspect your insightful guess is correct: The consulting industry is aggregating jobs and labor, thereby controlling — and depressing — pay. It wouldn’t surprise me if those economists totally miss the consulting-firm factor. (See Will a consulting firm pay me what I’m worth?)

The economists should ask workers who get their jobs via these aggregators, what is the difference between what a consulting firms pays them, and what the firm charges an employer for them. That’s never disclosed, and that’s the dirty little secret of the corporate world — and our economy. (We’ve looked at another topic that economists seem to view with blinders on: What the Federal Reserve doesn’t know about recruiters.)

But there are other issues and questions, too.

While I could ruminate for pages about what this means to workers and job seekers, and to our economy, I’m going to respect your request and roll this out to our community, in the form of a bunch of questions the article raises for me. Let’s see how everyone views this — and what questions and answers they’ve got.

I strongly suggest that everyone reading this column stop right here, and please read the Slate article before proceeding. It’s a worthy read — and I think it’ll get up your ire after it raises your eyebrows!

Are the data legit?

The Slate article by Jordan Weissmann raises a lot of questions, and not least of them is one about methodology.

  • The economists’ data set comes from CareerBuilder, “which publishes about one-third of all online job ads in the country.” Talk about an aggregator! What assumptions are those economists making about the validity and reliability of a major job board’s data, which comprises job listings that we all know are corrupt in more ways than we can count? (E.g., duplicate jobs, out of date jobs, fake jobs, composite jobs, inaccurate job descriptions, and so on.)

Questions about monopolistic pay practices

Nonetheless, the study raises provocative questions whether or not the data are legit.

  • In what other ways do employers monopolize a job market?
  • How do employers that are rolling in new-found profits explain this quote from the article?

“Since 1979, inflation-adjusted hourly pay is up just 3.41 percent for the middle 20 percent of Americans while labor’s overall share of national income has declined sharply since the early 2000s.”

  • What other employment practices “[cut] into labor’s share of the economy?”

Questions about anti-trust

  • Should the Department of Justice and the Federal Trade Commission investigate monopsony like it routinely investigates monopoly?

“Then there’s antitrust… This paper’s findings suggest that Washington needs to think more carefully about how mergers can impact the job market.”

Questions about minimum wage policy

  • Does the following assertion turn our entire political debate about wages on its ear?

“Take the minimum wage. The classic argument against increasing the pay floor is that it will kill jobs by making hiring more costly than it’s worth. But in a monopsony-afflicted world where companies can artificially depress wages, a higher minimum shouldn’t hurt employment, because it will just force employers to pay workers more in line with the value they produce.”

Is hiring no longer competitive?

Weissmann closes on this point:

“We’re living in an era of industry consolidation. That’s not going away in the foreseeable future. And workers can’t ask for fair pay if there aren’t enough businesses out there competing to hire.”

I’ll bring it back around to the insight (offered by the reader who kindly brought all this to our attention) about “consulting firms.” (I put that in quotation marks because most of these firms don’t consult at all — they merely rent workers for profit.)

  • To what extent does consolidation of hiring by a relatively small number of body shops (I think body shops is the more accurate moniker) result in manipulation of pay?

And who’s going to do anything about it?

Okay, folks: Have at it! Is there a growing monopoly on jobs that affects pay? How does it work? What do you think about all this? What questions do you have that we can all try to tackle?

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Benefits: The employer trick that lowers your job offer

In the November 28, 2017 Ask The Headhunter Newsletter, a reader interviews for a job at an acceptable salary, only to learn the employee benefits would mean a 20% reduction in compensation.

Question

Well, thanks for hitting me between the eyes… again. I’m talking about your recent column, More Money: What to ask for in a talent shortage. I was rationalizing a pursuit of a job offer. 

benefitsIt’s a great fit. I “did the job” with the Chief Information Officer and Director. The 30-minute phone interview turned into a 90-minute great discussion on where they want to be in 18 months. Now I have the technical interview. 

The problem is that I misunderstood the benefits. Originally I thought it was a wash in salary, and that the cost of living, benefits, retirement, and bonus were going to be a 20% bump. With relocation to a warmer climate, it was a win-win. Then I got the benefits package. 

I completely misunderstood. Once the benefits are factored in, it’s effectively about a 20% pay cut. There is no way I can absorb that. It’s a small shop and moving up would not be possible for a while given the staff they have in place.

(By the way, the recruiter for this company is absolutely amazing. She completely vetted me before she passed me to the company. She asked for my resume and then recommended that I change the wording on a couple of things. She never had me fill out an application. Then she set up the preliminary phone interview. We discussed salary but I think I heard what I wanted to hear. Fortunately, after that first interview, I asked for the benefits package. She sent it to me while I was on the phone with her.)

So here is my question for you. Do I go through with the technical phone interview and see if I can work with these folks? Then, before we put in any more time and money (and airfare), do I see if they can pay what I think I am worth? Or do I call it off now saying that it is a waste of our time if they are going to stick with their current salary range, given that the benefits are actually going to cost me money?

Nick’s Reply

The recruiter tells you: “The salary range is $X-$Y and the benefits are industry-standard.” Once upon a time, that meant you could decide to go on the interview based on the salary range. Today, it’s a common trick to lead you into a series of job interviews that result in a job offer far lower than you expected — after you realize that a lousy benefits package has effectively lowered your total compensation.

There are many other reasons to decline a “job opportunity.” See When job interviews are bad for you.
It seems you learned an important lesson: Get the compensation facts before you dive into a time-consuming interview process. That means understanding all the bottom-line terms, including benefits — up front.

Benefits are compensation

Make no mistake: Benefits are part of compensation. Lame HR managers like to say, “Oh, our benefits package is industry-standard,” as if you should be impressed. Really? A company’s benefits package should be as competitive as the salaries it pays — that’s what gives a company an edge!

(Note to HR managers: Learn to use your company’s benefits as a tool to get the best candidates to accept your offers! That means you must construct great benefits packages. That’s a key part of your job.)

Benefits and bonuses are components of compensation. Until you can tally up the total, you don’t really know what the offer is — or whether the company is worth working for.

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Why are benefits a secret?

But don’t kick yourself too hard. Companies generally don’t hand out benefits details before interviews – though they should.

Many employers consider employee benefits a company secret that’s not disclosed until you show up for orientation. (Imagine a car dealer saying, “We’ll tell you what the warranty is, and how many wheels the car comes with, after you pay for the car.”) As you’ve learned, benefits are a critical part of any compensation package. Meager benefits can undermine a seemingly good salary.

So, ask about the benefits and the salary range before you invest time interviewing.

Look under the rug

When a company’s lousy benefits have such an adverse impact on a compensation deal, there’s probably something wrong with the company. There’s dirt under that fine-looking rug. So turn up a corner and look underneath.

Is the employer a cheapskate? See WANTED: Top talent to work for dog food.
Good employers offer good benefits. And they don’t hide such information. When they do, it’s the oldest sales trick in the book: They count on you to rationalize a bad deal because you’ve already put so much time and effort into it.

I don’t see any evidence that you misunderstood. If you didn’t have the benefits information in advance, how could you really judge whether this was a good opportunity or a waste of time? How could you have judged the whole compensation package?

The recruiter’s role

What’s “amazing” about the recruiter is that she did not disclose up front that the company’s benefits package is lousy.

Is that really a good recruiter? Use these tips to decide: How to Judge A Headhunter.
I assure you, she knows, because other candidates have experienced the same shock you did. While I give her credit for some of the things she did (and didn’t do — like demanding an application), if she’s a really good recruiter, she reviews all compensation components before she recruits people like you. I’d never pitch a company with lousy benefits to any potential candidates. I’d wind up wasting their time and mine. My guess is she’s lost other good candidates late in the process, after all the facts came out.

Ask to see the benefits

Job seekers rarely ask to see benefits, retirement, vacation, bonus and commission details before agreeing to interview. That’s a mistake. Employers don’t like sharing such information until they make an offer, but that’s disingenuous. Any company with great benefits is more than happy to use them to entice good candidates to interview.

One of my favorite HR ruses is this statement: “We offer the same benefits to all employees. We cannot change our benefits for just one person.” People hear that and they shrug. Of course they can’t change their benefits just for me. That would be unfair to all the other employees. Then an applicant rationalizes that there’s no choice. If I want this job, I have to settle for what everyone else gets. Wrong. If the employer really wants to hire you, it can improve other terms of the offer to compensate (remember that word?) for poor benefits. (We’ll get to that in a minute.)

Companies with lousy benefits hide them, and HR managers try to make job applicants feel it’s “unprofessional” to ask for the information in advance. What’s unprofessional is luring people into dead-end interviews.

Don’t kid yourself

I see it again and again. Job applicants get offended and angry about the details of a job offer at the end of a grueling interview process — because they failed to ask about all the terms before they invested all that time and trouble to interview. Of course the terms matter! Don’t kid yourself! Understand the fundamentals of the deal before you work so hard to get it.

Many career experts recommend proceeding with the hiring process anyway. “Hey, you have a shot at a job! Why blow it by bringing up money?” They will tell you to wait until the offer stage to convince an employer to do what it already told you it will not do. Don’t kid yourself. That kind of advice reveals the advisor doesn’t have an answer for your predicament, because the advisor believes in fairies and miracles.

It’s up to you, but I would not rationalize any more, or move further into this process, now that you know the benefits are a deal breaker. Talk to the recruiter. Tell her your concerns. Tell her you’re very surprised and dismayed at the benefits package.

How to Say It
“Thanks for sharing the company’s benefits package. Unfortunately, it’s not competitive and would represent an effective 20% pay cut. I’d love to continue our interviews, but first I need the company’s commitment to compensate me for the significant difference in benefits they are proposing. It would be a waste of our time to keep talking about the job if the compensation terms — and that includes benefits — aren’t acceptable. Will your client make that commitment?”

What to ask for next

Don’t be too hard on yourself. If the salary range was acceptable and you based your decision to have a preliminary phone interview on that, I think you took a reasonable risk to explore the job. While you should have asked to see all the benefits up front, 99% of applicants don’t ask until after a job offer is tendered. At least you asked early in the process.

What troubles me is that the recruiter didn’t disclose the problem with benefits when she first spoke with you. I put that on her. So I’d let the recruiter know what’s wrong immediately.

Don’t say no to proceeding. Instead, tell her what the terms need to be so they’re acceptable to you. Don’t worry about whether the employer is likely to accept your terms. The point is to establish what it will take before you are willing to proceed. The details are up to you. Here are some possible gimmes:

  • Higher salary, commensurate with the loss of benefits value. I think this is the best offset because it will fund the difference.
  • A starting bonus, but keep in mind this would be a one-time payment that does not affect future pay. I’m not a big fan of this, unless you can’t negotiate higher salary. Then you must decide whether it’s worth it.
  • A higher bonus structure that effectively makes up for the loss in benefits. Just keep in mind that bonuses are not guaranteed. So ask for a guaranteed bonus.
  • Other terms that might satisfactorily compensate you.

Clearly, they are impressed enough with you to go the next step. They want to pursue this with you. That gives you leverage. Don’t be afraid to use it wisely and appropriately. Hey — if they have no qualms about offering you poor benefits, don’t worry that you’re asking for too much! Let them say no, or let them fix the problem.

Manage the recruiter

It seems you’ve found a pretty good recruiter — she’s done a lot right. Take advantage of that.

I’d tell the recruiter that if this deal doesn’t work out, you’d like to work with her again, if she commits to vetting these deals more thoroughly for you in the future, before setting up even phone interviews. Like this employer, she has recognized a good candidate. She is likely to work harder for you in the future because you represent a really good chance for her to impress another client — and to earn a good fee!

Make the employer work for it

Don’t get tricked into dead-end interviews by an employer that uses crummy benefits to effectively lower a job offer.

An employer uses interviews to test a candidate, to determine whether it’s worth proceeding with the hiring process. Job candidates should do the same. Test the employer. Will its compensation package, including benefits, bonus and other terms, measure up to your requirements? Then determine whether to proceed. Make them work for it, just like you do in your interviews.

I’d love to know how this turns out. My comments and suggestions are obviously limited to what I know. You’re the one that must live with the choice you make – so please use your best judgment.

What information do you demand before you agree to interview? We’ve covered only a couple of things here — salary range and benefits. What surprises have you encountered only after you’ve invested a lot of time in an “opportunity?” What else should this reader assess before going any further?

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More Money: What to ask for in a talent shortage

In the November 14, 2017 Ask The Headhunter Newsletter, an employer makes a lousy job offer and a job seeker misses the point: Ask for more money.

Question

more moneyAfter three interviews that included a lengthy presentation on how I would do the job, I was made an offer for a director-level position in a major city. I expected the salary to be upwards of $70,000. My current salary is $63,000. I also get good health benefits that cost me nothing out of pocket.

I was stunned when the offer came at $45,000, and I’d have to pay for health insurance. I literally cried. I am 33, 11 years out of college, and my resume rocks. Do they think I’m stupid? Are employers really so clueless? In this booming metro area, new grads get $45,000 for entry-level jobs. What they offered seems like a joke!

Should I even try to negotiate for an additional $20,000 to $30,000?

Part of me wants to tell them to screw off. The problem is that this director-level job sounds really great. But I would lose my apartment because average rents in the area are $1,800 a month. I couldn’t afford it, and I wouldn’t have enough for gas or  food. Maybe they think I live with my parents?

Where do they get off offering entry-level pay for a director role to someone with 11 years experience? Any advice? My family, my friends and I are in shock. Help!

Nick’s Reply

Employers complain there’s a talent and skills shortage, and that good workers are hard to find. But wages are not going up enough to reflect such claims.

Greedy employers and the talent shortage

I think it’s clear employers are doing three things:

For more about cheapskate employers, see Wanted: Top talent to work for dog food.
  1. They’re bargain hunting.
  2. They’re keeping more of their profits while productivity is increasing.
  3. They’re avoiding sharing profits in the form of higher pay for hard-to-find employees.

What does this tell us? If you’re a talented, hard-to-find worker talking to a company that’s facing a talent shortage, you should ask for more money because you can.

In July 2017, the Economic Policy Institute (EPI) reported that “CEOs of America’s 350 largest firms made an average of… 271 times more than a typical worker in 2016.” (In 1965, the compensation difference was 20X.)

If you don’t think there’s any error in the offer you received, then consider that it may be how the company operates. It’s greedy. So ask for a higher job offer.

Don’t contribute to the problem

Now I’ll reprimand you. I imagine you did not ask the salary range on the job before you invested your time inteviewing. That’s a huge mistake. Make sure you and the employer are on the same page from the start. When job applicants fail to test a salary range before interviewing, their wishful thinking contributes to wasting time. On the other hand, if you tried to assess the salary range and the employer declined to tell you what it is, see The employer is hiding the salary.

I give you a lot of credit for using the interviews to demonstrate how you’d do the job. (See The Basics.) That’s how to interview, and I’m guessing that’s why they chose you! But the salary offer is another issue.

Don’t rationalize

I’m concerned that you are already rationalizing taking a job for half what you think it’s worth because “this director-level job sounds really great.”

Really? Many employers try to substitute impressive job titles for fair salaries. They count on candidates talking themselves into an undesirable deal.

The problem now is that you may be confusing monetary compensation with the lure of a fancy job title. I’ll give you the benefit of the doubt and assume this really is a director-level role. Please be careful not to sell yourself short during a talent shortage. A title is not compensation for doing a job.

Accept the job and ask for more money

Learn from those highly paid CEOs. The EPI report notes that: “CEO compensation has grown far faster than that of other very high earners in the top 0.1 percent…” Why? EPI concludes it’s because of

“the power of CEOs to extract concessions.”

Pay attention! CEOs make big demands because companies perceive that there’s a shortage of great CEOs. You can play this game, too, if you have the nerve.

If you are ready to walk away from that job offer, then you have power because you have nothing to lose. So do not say “No” to the employer. Drive them nuts instead. (They deserve to have their cage rattled for playing salary games with you.) Treat them like desirable CEO candidates treat them. Accept the job, but extract concessions on the pay.

That’s right: If you still really want the job, why not try to get it on your terms? I’d accept the job, but I’d change the terms. You’re allowed to change anything you want in their offer before you accept it completely. Then it’s up to them to decide whether to agree.

How to Say It:
“I showed you I could do the job profitably for you, and I’m glad you were impressed enough to want to hire me. I want the job and I’d love to work with you! So I accept the job. But I cannot accept the terms you have offered. I’m ready to start work [tomorrow, or whatever day you choose] at $72,000. I will leave it up to you.”

Let the employer decide

Do not say anything more. (This is difficult, but keep your mouth closed past this point until they answer.) They already know all the reasons they want to hire you. Now let them consider whether they are willing to pay to get what they need, or whether they’re willing to lose you. (It can be a very long way to the next great candidate in a talent shorage!)

They will probably say no. But when they realize you’re really ready to walk away, it’s now on them to make a decision. They may come back with a better offer.

If they don’t, and you really are looking for a $70,000 job, politely tell them the following.

How to Say It:
“I am worth upwards of $70,000 in today’s market, where employers are complaining about a talent and skills shortage. I’ve found that your competitors are determined to hire hard-to-find talent and to pay what I’m worth. I wish you the best – it was wonderful to meet you and to learn all about your company.”

You don’t owe them any explanations at this point, so don’t let them drag you into a debate. Remember: They’ve already settled the main question: They want you. Now they must decide whether to accept your terms. If they press back, decide in advance whether you’re comfortable saying the following — then say it and stick to it:

How to Say It:
“I’m ready to take this job because I want to work with you. But my salary terms are not negotiable.”

Note that you have not rejected ther offer. In fact, you made a commitment when you accepted the job. Now let the employer decide whether it accepts your terms.

“I want more money.”

If you think you’re worth it, let an employer know you want more — and say how much. Just keep in mind that if they accept your revised salary, it’s not appropriate to negotiate anything else. You already said you’ll take the job if they meet your terms. If there are other things you want to negotiate, do that before you take a stand on the compensation.

For every employer that pays its CEO more than 200X what it pays the lowest-level employee, there needs to be a job candidate who is smart enough to insist on sharing that kind of wealth and success. The CEO is just another employee.

When they need you, extract concessions

You ask how such employers “get off offering entry-level pay for a director role to someone with 11 years experience.” Don’t over-think this. They do it because they think they can get away with it. That’s also why CEO candidates demand more money.

When is the last time you accepted “Because I said so” as the justification for why someone wanted to take advantage of you?

For more on this topic, please read “How can I go back and ask for more money?”
I’m not suggesting that you should be greedy and expect more salary than a job is worth. But if you’ve come to a reasonable conclusion that this employer is being greedy, and you think you can get a good job that pays $70,000 or more, you should not waste your time considering an unsatisfactory deal. Do not waste time negotiating. Instead, extract concessions or move on.

Look – if you need to pay the bills, and you need a paycheck of any size, I’m the last person to criticize you for talking yourself into a lower salary. Do what you must to live. But if you feel as strongly as you suggest you do, don’t fall victim to a greedy company that’s bargain hunting.

On to the next!

Do you know when to ask for more money? When you know you’re going to walk away anyway, don’t say “No” to a low job offer. Say “Yes, if you’ll pay me what I want.” Have you ever drawn a line like this?

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No college degree, no promotion?

In the October 31, 2017 Ask The Headhunter Newsletter, a successful manager pays the price of working for an employer who values a college degree more than the employee’s proven abilities.

Question

I have a great job in a fantastic company. Well, it’s fantastic except for HR.

college degreeI am an information technology (IT) manager with approximately 25 years experience. I lead a fantastic team. I have been a manager for many years here, I love my job, have never had a performance issue and, in fact, my team scores as the highest-engaged in the organization. I write industry articles and I am respected in my field.

While I am the only manager that reports directly to a C-Suite leader, my peers are at the director level. We (my boss and I) have been told time and time again that I cannot be promoted to director because I do not have a degree. I do the same work and have the same level of responsibility as my director peers, but without a degree they will not allow me to rise above manager.

I am basically a director without a proper title. Does this fall under any sort of discrimination? What can I do about it? I would love to go back to school but I am currently putting my own kids through college.

It is frustrating to think that I would have to leave a job and company I truly love just to further my career.

Nick’s Reply

I can’t tell you how many times I’ve seen this story. It’s a distressing commentary on corporate management. Unless someone has explained to you what the material value of a degree is to the director-level jobs, the company is risking losing one of its most productive people for what seems to be an arbitrary reason.

How much is a college degree worth?

Check out what one reader did, in No College Degree, No Problem. The article discusses some tips from two of my PDF books that might be helpful in demonstrating your value to your employer.
I would stop there, but you said something that possibly reveals a more insidious problem. You do the same work as the directors, but you’re only a manager. I’m guessing you’re also paid less than the directors. Is it possible your lack of a degree is being used as an excuse to avoid paying you a director-level salary? How much is that degree worth in salary? Is there a way you could compensate for the degree that your company might find acceptable?

I’m not a lawyer so I can’t comment on discrimination or legalities. It might be worth investing a few bucks in a good employment attorney for an opinion and guidance. My guess is that their advice might depend on whether the degree requirement is levied on all employees or just on you — and on whether you’re paid less than others for the same work.

The EvilHRLady

To get another perspective, I turned to my good buddy Suzanne Lucas, who writes the outstanding (and contrarian) EvilHRLady column for Inc. magazine. She’s one of the few HR gurus I respect and trust — her insights and advice cut through the bureaucracy every time. She’s not a lawyer, either, but she’s got more experience with HR compliance than I do. Here’s her reaction to what I told her about your situation:

“There’s nothing illegal about discriminating against someone who lacks a college degree, but there is a whole lot of stupid involved. If you’ve got years of experience that prove your capabilities, then what does it matter what you did between the ages of 18 and 22?

“That said, I’d advise you to do a degree. I tend to recommend Western Governors University for situations like this. Not because I think you need to learn these things but because companies are super hung up on the idea that everyone needs a degree.”

A whole lot of stupid about a college degree

Suzanne and I agree: Your employer has a whole lot of stupid going on.

But we’re both pragmatists, and that’s why I also agree with her prescription. You need to decide what’s important to you, and figure out how to achieve it. If your company is dead-set against promoting you without a degree, your next step is to find good companies that will commit to your career growth without the need for a degree. Or you have to get a degree.

You must decide which route to take.

The ROI of a college degree

I think I’d take one more shot at convincing your management that you deserve to be a director without a degree. Run this by your boss first, but then request a meeting with the president or CEO of your company. Negotiate. Respectfully make your case about how you can deliver the ROI expected of a director — but do not threaten to quit. Explain that you understand the policy, but that you wanted to ask whether they’d make an exception after qualifying you in some other way for a director’s job. If you’re told No, shake hands, smile, and go back to work.

Then decide what to do.

If you decide a degree is a solution, you may not have to wait until your kids finish college. Be smart about it. Get a degree from an accredited distance-learning college that doesn’t cost as much as a traditional school. (See Can I earn a degree from the School of Hard Knocks?) In other words, calculate the return on investment (ROI). You may find it’s positive and worth the investment.

Find an accredited distance-learning school

While I trust Suzanne’s guidance, I don’t know the school she recommends. One of my favorite distance schools is New Jersey’s Thomas Edison State University. (I have no affiliation with TESU.) It’s a publicly funded, accredited state school. Do your own research. Consider trying a degree program. Just make sure it’s accredited and that any credits you earn are transferable.

Here’s what you might not know. The cost of a degree may be less than you think. Likewise the investment of time. And the ROI may be better than you’d guess. I learned these tips long ago from my friends at Thomas Edison:

  • You can test out of many required courses by virtue of your knowledge and experience.
  • This saves you money, and it can cut down the time to a degree dramatically.
  • You can even complete much of the coursework and then transfer your credits to a better-known bricks-and-mortar school if it means something to you to have a sheepskin from a “name” school. (I wouldn’t worry about that.)

Don’t rule out the degree too quickly because of cost. There’s probably a similar state-funded college where you live.

Solve the problem

Your problem is not lack of a degree. Your problem is that you can’t get the kind of job and title you want. So focus on how to do that. Talking to your management one more time is important — don’t make any assumptions. Then choose.

The risk you face if you leave your job to go to another company without a degree is that you may face the same problem. Like Suzanne Lucas, I think your company’s policy may be counter-productive. But I don’t control employers. And you can control only yourself.

I wish you the best.

An even bigger problem

pumpkins

Because we love to have in-your-face discussions about heavy-duty issues here, I’d like to point readers to an article in the Washington Post: Wanted for any job: A bachelor’s degree. Is that smart? (Heads up: The Post requires a paid subscription to read more than a limited number of free articles.) Here’s the controversy:

“Look closely at most job advertisements these days and you’ll notice an interesting, if not disturbing, trend: Most of them require a four-year college degree.

“Economists refer to this phenomenon as ‘degree inflation,’ and it is spreading across all kinds of industries and jobs. Among the positions never requiring a college degree in the past that are quickly adding that to the list of desired requirements: dental hygienists, photographers, claims adjusters, freight agents and chemical equipment operators.”

Hmmm. WTF?

When do college degrees really matter? Have employers gone bonkers? Are the economists right — is there real degree inflation? Okay, folks — it’s time to pile on!

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Salary History: Use California’s new law for better job offers

In the October 24, 2017 Ask The Headhunter Newsletter, we take a deep dive into California’s new salary history law. Is it going to help you get a better job offer?

Note: This article is not legal advice or a substitute for obtaining competent legal counsel about salary history disclosure laws.


salary historyYou’ve probably heard this from an HR manager who has demanded to know your salary history while you’re applying for a job: “It’s required. If you don’t disclose your salary we cannot proceed with your candidacy.”

It’s akin to a salesman on a car lot demanding to see your bank account balance before he tells you the price of the car you want. Once that cat is out of the bag, you can’t negotiate effectively.

Now the State of California has made it illegal for employers to ask your prior salary. See Assembly Bill No. 168. (See also this article in the San Francisco Chronicle.) This can help you negotiate a better compensation deal.

You have 2 new powers over personnel jockeys

But not so fast. Hiding your old salary isn’t going to help you get a higher job offer unless you can obtain another critical bit of information from the employer: What’s the salary range for the job you’re applying for?

Good news: The California legislature thought of that, too. Starting January 1, 2018, employers can’t ask your old salary and, if you request it, they have to tell you what the pay range is for the job you want.

You now have two new powers over employers and their personnel jockeys in California. You may:

  1. Decline to disclose your salary.
  2. Ask the employer “to provide the pay scale for a position.”

What you need to know

It’s important to understand the details of your new rights. Therein lies your real power — the power to avoid wasting your time with jobs, applications, interviews, recruiters and employers who want to break you down so you’ll cave in and accept a lower job offer. Use these powers thoughtfully, and you should be able to get the kind of salary you want.

Here’s what the new California law says (emphasis added):

SECTION 1.  Section 432.3 is added to the Labor Code, to read:
432.3.  (b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.

Now we’ll expand on the aforementioned two new powers you can exercise when applying for a job.

1. Decline to disclose your compensation

This means never disclose your prior pay or the value of your benefits:

  • When you fill out a job application.
  • When an HR recruiter from the company requests it.
  • When a third-party recruiter (or headhunter) solicits you for a job at the company.
  • When you participate in a telephone interview.
  • When you communicate with the employer or recruiter via e-mail or otherwise.
  • During a job interview, and,
  • Apparently, under this new law, after you’ve been hired and you’re filling out employment paperwork.

An employer that doesn’t know your old salary and benefits has a harder time low-balling a job offer. I can’t tell you how many times I’ve heard employers say, “Our offers are 5-10% above a person’s old salary. That’s our policy.” As if that has anything to do with the value of the new job — or the value you bring to it! For more about this, see Revealing my salary earned me a lower job offer!

Never disclose your prior salary to anyone connected to an employer where you’re applying for a job in California (or anywhere else, but in that case for other reasons). Because if you do, you’ve relinquished your rights — because there’s a gotcha in the new law. We’ll discuss that in a minute.

First let’s look at the more important of the two powers California now grants you.

2. Request the pay range of the job

This is the best part. The employer has to tell you what the job pays. This is what will help you avoid wasting your time on jobs that don’t pay in a range you’re willing to accept.

(c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.

You read that right. They can’t ask for your salary history, but they have to tell you the pay range of the job you’re applying for. If you ask. So ask! And ask in advance of filling out forms, having interviews, and otherwise investing your time.

I think it’s more important to know the pay range of a job than it is to withhold your own pay information. But, of course, it’s best to use these two tools in tandem for maximum benefit.

Now, here’s the tough-love part. When they tell you the pay range, don’t kid yourself if it’s lower than you’d like. Don’t proceed under the impression that you can “talk them higher” later on. Conversely, if you use this law to apply only for jobs that pay twice what you may be worth, you’ll probably be disappointed if you expect enormous job offers.

Beware the gotcha in this salary history law

Those two new powers can gain you a lot during your job search in the State of California, unless you’re applying for a government job or other job that’s exempt. (Read the full text of the new law.)

Now let’s get to the aforementioned gotcha. Read this next part of the new law carefully. (Emphasis added.)

432.3.  (g) Nothing in this section shall prohibit an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer.

Yep. That means you’re free to spill the beans if you want to. And here’s how spilling the beans will get you screwed:

432.3.  (h) If an applicant voluntarily and without prompting discloses salary history information to a prospective employer, nothing in this section shall prohibit that employer from considering or relying on that voluntarily disclosed salary history information in determining the salary for that applicant.

Got that? Once you disclose your salary history “voluntarily and without prompting,” much of your protection under this law disappears.

Why you may need a lawyer

Any time you’re dealing with a massive amount of money — like the salary you’re going to earn for a year or more — it may be worth consulting a lawyer. A consultation with a labor or employment lawyer, to ensure you know what you’re doing in an employment matter, will cost you only a small fraction of that massive amount of money in order to protect that massive amount of money. Consider making an initial investment in legal advice, then proceed prudently.

You may also need a lawyer if you find an employer has violated California’s new law, because of one more gotcha:

(d) Section 433 does not apply to this section.

Section 433 of the California Labor Code says:

433.  Any person violating this article is guilty of a misdemeanor.

This means that while violations of other sections of the Labor Code are a misdemeanor, a company that demands your salary history or refuses to tell you the salary range of a job is not committing a misdemeanor. This new law does not define the penalties for violations.

If you want to fight violations of this new law, you’ll probably need a lawyer. It might even turn out that this Section 433 clause renders Section 432.3 toothless once it winds up in court.

What about your state?

Similar laws are under consideration (or have already been passed) in some major cities including New York City, San Francisco, Philadelphia and Pittsburgh, and in some states including California, Massachusetts, Delaware, Oregon and Puerto Rico.

Some of the legislation is controversial, and special interests are trying to block it. The Washington Post offers a good rundown in “New York City just banned bosses from asking this sensitive question.”

This issue is so hot that it’s best to look up your own city and state for accurate information.

What’s your best option?

We’ve barely touched on the myriad issues these laws raise. If you’re interested, you’ll find more here: Goodbye to low-ball salary offers.

Whether there’s a law against demanding your salary history or not, you can always say NO and decline to disclose the information. (See Keep Your Salary Under Wraps.) As long as you’re not party to a contract whereby you have agreed to disclose salary information (an employment contract might be an example), you never have to disclose it. There is no law I know of that obligates you to disclose your salary.

Of course, refusing to disclose might result in an employer rejecting you as a candidate. That may be their right.

In that case you may be better off finding a more reasonable employer who isn’t trying to manipulate salary negotiations by insisting on knowing your prior pay. You’ll get the best deal possible if you withhold information about your prior compensation, because the employer will be forced to base an offer on the value you prove you can deliver. (Did we just open a new can of worms? Yup. We don’t pretend anything is easy around here. See How do I prove I deserve a higher offer?)

Have you encountered one of these new laws in the wild? What happened? What’s your take on this kind of legislation — and on how to best protect your ability to negotiate compensation? What other issues do these new laws raise?

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