I recently answered a question on Quora Why does every employer ask about my current salary during a job interview? The individual elaorates to say “Everytime I have a job interview or ask a friend about one of theirs, eventually the employer asks about current pay. This happens independently if I sent a CV or if they got in touch with me first. Why is that?”
Employers ask this for several reasons
#1: They want to understand how cheaply they can acquire you.
If anyone gives you fluff answers such as different titles indicate different salary level etc, bottom line it comes down to the same thing, they want to place you in a band, they want to understand how cheaply they can acquire assuming they ( and you ) believe you are a good fit for each other.
#2: Gives them an indication of whether you are likely to be a the top performer
A top performer would have done their market research, by obtaining information from industry publications or from websites that provide hiring and salary data for a wide variety of professions. They would have also spoken to acquaintances who have worked there or if you are just starting out you can speak to staff members at your careers /placement office.
More generally, once you know what you don’t know, you understand your zone of possible agreements, and you know how to negotiate.
#3: Whether you are within their budget ( can they afford you)
If you got this far, and they want to know whether they can afford you, it’s a good sign. Though this answer alone is not going to determine whether you are a good fit as some indicate.
Bottom line, companies want to know why are you here, what can you do for us, what kind of person are you, and what makes you stand out from the pack. its only after this, that they think about whether they can afford you!
NOW THAT YOU KNOW WHY THEY ASK, HOW DO YOU ANSWER THIS QUESTION?
ANSWERING THIS QUESTION, ALSO PROVIDES AN IMPLICIT VIEW OF WHETHER YOU ARE A TOP PERFORMER
So how you answer this question reflects whether you are a stand out top performer versus everyone else
A SUGGESTED TOP PERFORMER ANSWER (based on your research)
“According to my market research the current market rate for these type of roles are X-Y. I would be looking to be compensated at the higher end of Y for the following the reasons ( and then state reasons why you believe to be compensated in the higher end).
Note: Remember in a job offer – salary negotiation, everything is up for negotiation, not just the salary. Your number of paid holidays, your benefit scheme, your flexible working hours etc…so think of your salary negotiation as package deal.
IF YOU GIVE AWAY YOUR SALARY, YOU LOSE YOUR BARGAINING POWER.
Typically most job candidates don’t negotiate, so if the employers offered a package similar to the candidate’s previous salary ( because you told them) with a minor uplift, the candidate would take it. You have effectively lost out on possibly gaining more because the employer might have had a much higher range to offer. Now we all expect everyone to be fair, if everything was FAIR, we wouldn’t have a gender pay gap! 🙂 So its time for everyone to upskill in this area and get better at negotiating!
- If a recruiter asks you this question versus an employer – you can counter with, before I answer that please can you let me know the salary range for this role that you are looking to hire into. So they should be able to provide an answer, and from that, you can decide how you respond.
//If you think the salary band is low//
You can tell the recruiter, based on market research, the salary is X-Y, and ask them why is the salary band is at the level it was posted. Because every role, while the title may sound similar, may provide different responsibilities and this is something you can only uncover either during the interview phase or asking the recruiter to clarify.
//If you believe the salary band is within the range//
Likewise, if it is within the range you are looking for, you can say, great, it is within the range you are looking for and you are looking to get hired on the higher band because ( list your achievements and transferrable skills)
Some people feel its OK to divulge your salary, and bottom line there is no right or wrong, just the difference between an AVERAGE AND a TOP PERFORMERS.
So ask yourself, what do you want to be!
So what is the psychology behind this question, it is called the “anchoring effect” ….here is some background if you are interested.
In psychological terms its called the “anchoring effect”…
In situations of great ambiguity and uncertainty on either party, first offers have a strong anchoring effect – they exert a strong pull throughout the rest of the negotiation.
According to a Harvard article written by Adam D Galinsky, the author provides an example using Real Estate Agents, in that real estate agents should be able to resist the anchoring effect of a property’s list price because of their presumed skill at estimating property values. Testing this theory, researchers Greg Northcraft and Margaret Neale had real estate agents inspect a house and estimate its appraisal value and its purchase price. Northcraft and Neale manipulated the house’s list price, providing high and low anchors. All of the agents’ estimates were influenced by the list price, yet they denied factoring the list price into their decisions, instead citing features of the property that would justify their estimates.
As this research makes clear, anchors affect the judgment of even those who think they are immune to such influence. But why?
Adam Galinsky’s article suggest the answer lies in the fact that every item under negotiation (whether it’s a company or a job) has both positive and negative qualities
—qualities that suggest a higher price and qualities that suggest a lower price. High anchors selectively direct our attention toward an item’s positive attributes; low anchors direct our attention to its flaws. Hence, a high list price directed real estate agents’ attention to the house’s positive features (such as spacious rooms or a new roof) while pushing negative features (such as a small yard or an old furnace) to the back recesses of their minds. Similarly, a low anchor led them on less desirable attributes.
So how does this apply to job candidates and why do they ask your current salary ?
The reason they ask what’s your salary is to see how cheaply they can buy you. This is the basic theory for anyone running a business is to keep your costs down.
Anchoring effect significantly favours recruiters/employers, as they have more information about the pay grade than you do.
Typically most job candidates don’t negotiate, so if the employers offered a package similar to the candidate’s previous salary ( because you told them) with a minor uplift, the candidate would take it.