Some Firms Use The Practice Of Requesting Salary History

The Top 10 Business and Recruiting Reasons for Requesting Salary Information

All buyers want to know the possible price range of their expected selection. It’s a standard request in all business transactions, including recruiting. In addition, many firms request salary history also because their recruiting competitors do. And that is why many firms support the ban because it will guarantee an equal playing field across all firms. So if you want to fully understand why firms find it valuable, how they use it, and how in some cases it can even help the candidate, here is a comprehensive list of those justifications, uses, and benefits to the candidate.

How firms use salary history (plus how revealing it can actually help candidates)

The top 10 salary history uses are listed here, with the most impactful uses listed first.

1. Growth in salary is an indicator of continued performance improvement — in many cases an applicant’s actual pay is less important than the fact that they received frequent pay increases and even larger bonuses. Because this compensation progression is evidence of the candidate’s performance, their growth, and their career trajectory. And because a continuing increase in performance is an important selection and hiring criteria, revealing constant salary growth will make an applicant a top one.
2. It might indicate that someone is a hungry candidate — salary data for each major firm is readily available on social media sites like glassdoor.com. And as a result, many firms assume that smart applicants already know that by joining their firm, they are likely to get a significant salary bump. So if an applicant’s current salary reveals that they are paid less than what the target firm offers, by applying for a job, it demonstrates to the recruiter that the applicant is hungry for a “salary bump.” And being hungry may by itself cause an applicant to be considered a “top candidate” because that hunger will mean that an applicant is likely to stick with the hiring process until the end. And even if the firm takes a long time to make that higher money offer, the applicant becomes an even more prized candidate because they are much more likely to accept our offer.
3. It provides an outside/second opinion on a candidate’s value — it’s a common practice in business to gather data from multiple sources. So by providing an applicant’s salary history, it provides the firm a second “outside opinion” on what they are worth. And this second data point may keep this firm from undervaluing a candidate when they do decide on what to pay.
4. It reveals if a candidate can successfully negotiate — asking the candidate to provide their salary history is in part a test of their negotiation skills. Good negotiators are highly valuable to a firm, regardless of the position they are in. And firms have found that the best negotiators will be able to withhold their current and future salary expectations until the end of the hiring process. So the question reveals if a candidate is highly desirable because they found a way not to reveal this strong negotiating point until the very end of the hiring process.
5. It quickly reveals those that we can’t afford — providing it quickly reveals whether a candidate is even worth considering because they are too expensive. And eliminating “little chance candidates” early on saves the firm time and money. From the candidate’s perspective, of course, a salary history or current salary expectations might get the applicant rejected early. But on the positive side, an applicant won’t have to wait for months to find out that they really had no chance from the beginning. And some individual applicants might want the opportunity to accept a cut in pay. But from the firm’s perspective, that can be a too costly chance to take when there are so many other qualified applicants without major salary issues that are hard to overcome.
6. It shows that compensation matters, which attracts money-driven people — some of the most desirable candidates, especially those applying for sales jobs, are strongly driven by money. Making it clear that a firm cares about money (by demanding salary history) can help to attract those who care a great deal about it. And because money-driven candidates can easily recall and in some cases they are proud of their salary history, asking for it is not an impediment. So merely asking the question aids in identifying the desirable money driven people, while it simultaneously drives away others. If a candidate is driven by compensation, firms that focus on salary history may be their ideal target.
7. The question shows how a candidate can handle stress — hiring individuals who can handle stress is important for most jobs. As a result, some firms wait to ask their salary-related questions until the interview. Because the question is a highly stressful question when asked in person, asking it can reveal how well a candidate can handle pressure. If a candidate demonstrates that they can handle stress well by providing a quick and clear salary history or expectation answer during an interview. It may improve their chances of getting an offer.
8. Knowing the history of both genders allows a firm to take proactive action to fix inequities — when a firm collects salary information from both genders, it allows managers to quickly see the difference between the salary histories of applicants from both genders. Seeing the inequity can raise awareness and increase the probability that the firm will take proactive action to ensure that they actually pay new hires of different genders the same. Gathering salary histories also helps a firm to supplement its salary survey data. And in aggregate this new data can help a firm adjust all of their pay levels to meet changing market rates for that job.
9. Recruiters will guess anyway and that may hurt candidates — if a candidate doesn’t reveal their salary history, recruiters will be forced by their hiring managers to guess their current salary anyway. And they may guess too high, which will lessen a candidate’s chances of moving forward in the hiring process. So accurate salary information rather than being intrusive may actually help a candidate’s hiring chances.
10. It helps recruiters refine the firms they target – after receiving multiple salary history data. Recruiters can adjust and drop some firms that they had been targeting once they realize that they can’t compete with them. By reducing their list of targeted firms, this saves the company a great deal of time and money. Although narrowing down the field doesn’t help candidates, it does allow recruiters to spend more time with the candidates from firms that they can compete with.