Be more transparent about salary!

Let’s face it: when it comes to painful activities, salary negotiations can rank up there with a visit to the dentist. Miscommunication and misaligned expectations on both sides are a big part of the problem: employers often keep workers in the dark about how they determine compensation.

Compensation software maker PayScale recently surveyed employees about whether their employers were transparent about pay and just two out of 10 of those polled said yes. For what it’s worth, employers are also willing to acknowledge the lack of information, with only four out of 10 saying they offered pay transparency. Interesting, since research has shown that a transparent pay environment can improve performance and increase productivity.

Shrouding the process in secrecy fosters mistrust on both sides, and can lead to low morale and disloyalty. Hiding salary information also causes employees to jump to their own – often wrong – conclusions about their compensation and how it compares to industry averages. In another PayScale survey of 71,000 workers, 64 percent of respondents said they believed they were being paid below market, when in actuality, they were earning market rates. Another 45 percent who were paid above market salaries, thought they were only earning average market rates.

Fortunately, these are the type of misperceptions that often result in turnover.

Given the potential benefits, doesn’t it make sense to be more transparent with salary negotiations from the start, during the recruitment process? Prospective employees should also be honest from the beginning about their salary expectations, rather than waiting to find out what an employer might be willing to offer. Having an open dialog should make the process easier and leave employees feeling more satisfied about the outcome.

Here are some strategies for both employees and employers to consider when approaching the negotiating table:

For employers: Don’t negotiate solely on salary history. If you’ve done your homework, you should have a good idea of what the going rate is in your market and industry for the position you’re hoping to hire for. You’ve likely budgeted a salary based on that information and a candidate’s previous pay shouldn’t factor into that equation. In other words, don’t try to get a “good deal” because a candidate earned a lot less in past jobs. When I work with clients, we always have a discussion about market rates for the position in question, and from there set an acceptable and realistic target salary range.

For employees: Be willing to justify a big increase. If you’re eyeing a large increase from what you were previously earning, be prepared to explain why your value is more than your salary history suggests. Maybe you worked in a hard-hit industry or firm where meager standard of living raises kept your salary low. Or perhaps you worked in a start-up where a lower salary was supplemented with equity in the company. If you are working with a recruiter, honesty is always the best policy, as they will help advocate for you when it is time to negotiate.

For employers: Establish a realistic figure. In a tight labor market, asking for the moon and the stars and offering a low salary probably won’t yield much response. Likewise, be prepared to pay more if you’re looking for highly specialized skills or a certain cultural fit. If you’re worried about your dream candidate getting away because you can’t afford them, be honest about why you can’t meet their expectations and consider adding flexibility and other perks to help sweeten the deal.

For employees: Establish a realistic figure. Some workers view a job change as an easy way to gain an increase in salary. While that’s fine, you should be armed with data demonstrating why you’re worth the salary you’re demanding. The range you’re asking for should be in line with industry and market averages unless your skills are unique, in high demand or you bring a special knowledge or experience to the table. And remember that a typical increase from a job change falls in the neighborhood of 5 to 10 percent.

For employers: Be forthcoming. If you have a salary range in mind and don’t plan on going above that number, be frank with candidates about that fact. Some employers don’t like to reveal salary information until discussions with a candidate become more serious. The problem with that strategy is that in some cases, you might find out too late how far apart you are. It’s better to be upfront about what you plan to pay and weed out candidates who are out of your price range. This is one area where working with a recruiter really adds value, as having a third party makes it much easier to have this as part of the upfront conversation.

For employees: Don’t lie. If you want to start off on the right foot with an employer, don’t exaggerate your salary history or past experience in hopes of gaining a bigger paycheck. Some employers now ask for a W2 as proof of former income before making an offer. While some may disagree with this tactic, if you land the job on dishonesty, it may eventually come back to haunt you.

Employing these practices should help facilitate a more honest and hopefully more productive discussion. Using a recruiter can also help make the negotiating process easier since we can serve as a neutral third party. The goal should always be to start the relationship with all the cards on the table to build trust for the long term.