Salary Negotiations: Who Should Reveal Their Hand First?
Translated & summarized from Bizportal by baba
Job candidates are often asked about salary expectations early in the hiring process, which can anchor negotiations and potentially lead to lower offers. While revealing current salary can be risky, research suggests withholding it may also be detrimental. European regulations are moving towards greater salary transparency, requiring employers to disclose salary ranges and prohibiting inquiries into salary history. In Israel, candidates are advised to research market rates, define their own salary goals, and ask clarifying questions about salary ranges and their components to ensure a fair negotiation.
The story in 5 lines · by baba
- Early salary expectation questions can anchor negotiations, potentially disadvantaging candidates.
- Revealing higher previous salaries may lead to better job offers, while withholding information can be perceived negatively.
- European regulations mandate salary range disclosure and prohibit inquiries into salary history.
- Research on salary transparency shows mixed results, with some studies indicating wage increases and others suggesting more rigid negotiation.
- Candidates should research market rates and their own goals to ask informed questions about salary ranges.
In job interviews, the question of salary expectations often arises early, sometimes before the full scope of the role is understood. While employers know their budget, candidates are asked to state a figure without knowing if they are asking for too much or leaving money on the table. This practice, while seemingly a simple screening tool, can significantly influence the entire negotiation process. The initial salary figure mentioned can become the anchor point for all subsequent discussions, affecting what is considered a good offer and what compromises seem reasonable.
This anchoring effect, where the first number presented heavily influences subsequent judgments, can disadvantage candidates. If a candidate earning NIS 12,000 states they would accept NIS 14,000 for a new role budgeted at NIS 16,000-18,000, they may inadvertently set a low opening bid. Similarly, an employer can set a low anchor, making a slightly improved offer seem more generous than it is. The difference of a few thousand shekels monthly can amount to tens of thousands annually.
While some advise against revealing current salary, research suggests this isn't a foolproof strategy. Studies indicate that revealing higher previous salaries can lead to higher job offers and a perception of stronger negotiation power. Conversely, withholding salary information can lead recruiters to draw negative conclusions about a candidate's quality or bargaining strength. The challenge lies in balancing the need for information with the risk of anchoring oneself too low.
Across Europe, a shift towards greater salary transparency is underway. A directive adopted in 2023 grants candidates the right to information about starting salaries or salary ranges for a position and prohibits employers from inquiring about a candidate's salary history. While not automatically applicable in Israel, this European move offers an alternative to the current practice where candidates are often pressured to reveal their hand first. Research on mandatory salary disclosure in job ads in the US suggests it can increase the percentage of ads with salary information and lead to a modest increase in wages, potentially due to heightened employer competition.
However, not all forms of transparency guarantee better outcomes for employees. Some studies indicate that laws protecting employees' right to discuss salaries with colleagues might lead to employers negotiating more rigidly to avoid widespread demands for raises. Therefore, the impact of salary transparency depends on what information is disclosed, to whom, and at what stage of the negotiation. Even when a salary range is provided, details about professional levels, bonuses, and criteria for the upper end are crucial for a truly informed negotiation. Candidates are advised to prepare by researching the role, market rates, and their own financial goals, and to ask clarifying questions about the salary range and its components early in the process.