There's a Way to Explain Lower Pay to New Hires

BY SARAH LYNCH, STAFF REPORTER@SARAHDLYNCH

If you're sitting across from a great candidate, but you aren't willing--or able--to meet their desired number, there's still hope for sealing the deal.  

In the pandemic's wake, workers were in the driver's seat as quit rates reached record highs. More than half of those employees who quit in 2021 reported higher pay at their new job. Then, job changers could expect a 20 percent pay bump after making a move, which helped push all wages and salaries for private industry workers up 5 percent over the course of 2021, according to the U.S. Bureau of Labor Statistics. 

But since then, the job market has slowly cooled--although not workers' expectations, leading to a disconnect. Recent data from Gusto, the payroll provider, found that companies are paying 3.5 percent less for new hires compared with the same time last year. Meanwhile, the latest jobs report showed that average hourly earnings, while still above pre-pandemic levels, have decelerated.  

Workers' salary expectations, on the other hand, hit a record high in July. So, how should you communicate lower-than-desired pay and still present an attractive offer? Here's what experts say: 

Share and compare salary information   

Before engaging in a salary discussion with a prospective hire, company leaders should evaluate the fairness of their own salary to engage in a more effective and honest conversation, says Kim Scott, a former CEO coach at Dropbox and Twitter, among others, and author of the 2017 leadership book Radical Candor. 

For instance, company leaders could consider how their own salary compares with their lowest-paid employee's, Scott recommends, and where there might be opportunities to better spread the wealth. At Scott's own coaching and consulting company, Radical Candor, she and her co-founder do that very exercise at the end of every year, she says.  

Then, if the pay gap is fair, and your budget is still too limited to make any significant pay increases, you can be transparent about that with your team and new hires. "I recommend just being open with people," Scott says. "People will assume [the gap] is worse than it actually is." 

Even more, leaders could assure team members that if they increase their own salary, they will do the same for everyone, she says. Good faith efforts and transparency like this could make that lower pay easier to accept.  

Emphasize autonomy and upward mobility  

Smaller companies, in particular, can often offer independence and growth opportunities that might not be as accessible at a larger firm, says human resources researcher and consultant Josh Bersin. "The bigger the company, the narrower the job. The smaller the company, the broader the job," he says. 

So, employers should harp on these positives in the hiring process. For instance, on the autonomy front, they can stress the role's decision-making authority, says executive coach John Baldoni. Employers can also assure prospective hires that leadership will personally listen to their advice and insights, Scott says: "I think that makes a big difference for folks."

This greater autonomy and the ability to quickly develop "jack-of-all-trades skills" can lead to better advancement opportunities, as well, Bersin says. "That's a selling point, particularly for folks who want to become a general manager or something like that," he says. Stress that this advancement will, of course, come with commensurate pay bumps in the future, Baldoni adds. 

Highlight your culture and mission 

Aside from professional opportunities, workplace culture matters, often even more than compensation, according to one survey. Thus, if a candidate points out that they could get a bigger salary somewhere else, leaders can explain why they believe they'd still be happy at the organization, Baldoni says: "Because you're not going to win the salary war."  

For instance, leaders might share details and examples about the supportive, collaborative, or ambitious nature of the company, Bersin adds. And because of the size of the team, "the hiring manager in a small company can say that with a lot of credibility. The hiring manager at a big company maybe can't," he says. 

Different aspects of the company culture will appeal to different candidates, says Jim Link, chief human resources officer for the Society for Human Resources Management. With younger candidates, for instance, "if you can talk about cultures of inclusion, cultures of innovation, cultures of collaboration, or cultures of learning, that's going to set off positive alarm bells," he says. 

You can also stress the company's mission, Bersin says, which can feel more focused at a smaller firm. "In our company, for example, we have about 40 people. I would say every single person who works for us could be making more money somewhere else," he says. "But they love our mission, and they love the fact that they get to be part of something and create something."  

Promote your benefits  

Another area where companies can differentiate themselves: benefits. Unlimited paid time off or professional and leadership development training are two "widely accepted and highly regarded" ones that companies could consider, Link says. And if you offer a hybrid or flexible work schedule, "sing it and shout it from the mountaintops," he adds.  

What that means for every company could be different, from a shortened workweek or some Friday afternoons off, he says: "We at SHRM are always surprised by just the sheer ingenuity that organizations come up with whenever they're trying to meet employee concerns related to flexibility and agility."   

Additionally, think about where you might add monetary benefits for your employees outside of their salary. For instance, stock options at a smaller company can become even more valuable if the company gets acquired or goes public, Bersin says. 

Great benefits don't need to be costly, either. As long as they help employees feel a sense of community, they can be effective, Baldoni attests: "I think especially in startups, people want to belong to something greater than themselves." 

Photo Credit: Getty Images.