Insight on Demand | Candidate Salaries
The big bone of contention | Candidate salaries | To share or not to share...
Let’s face it, this is a contentious area. Coming forward with one view or another in the recruitment world on this is a bit like declaring your party political allegiance in public. Please don’t get me wrong, I am not launching this topic for clickbait. I simply feel there’s a sensible discussion still to be had, which explores both sides. My objective is more to take the role of arbitrator and I will refrain from too clearly indicating my preference wholesale. That said, I will aim to provide a fairly clear indication of where I think things are going, or perhaps should go and the reasons for this.
As a sign of where things are heading in the region, I will quote a recent update from Josephine Teo, Minister for Manpower in Singapore, who made a seemingly radical assertion regarding this culturally ingrained process: ‘There are no rules stating job seekers must declare their last drawn salary and employers cannot insist they do so’. Instead employers should take a ‘practical approach’ and that ‘ a candidate’s last drawn salary can help employers gauge his or her seniority to make an appropriate job offer’. It’s perhaps on the latter part of her statement that we can defend this practice as supporting the interests of the candidate in certain cases.
The fact is, this practice very much remains part of the negotiation ‘modus operandi’ across South East Asia. It is understandably perceived as rather confronting to those not familiar with it though indeed I sense growing unease with those that are. It’s understandable given the fact that this is completely non-standard in most Western countries and rather smacks of institutionalized mistrust. It also, by its nature, seems to rub against a sense of personal liberty and privacy. These are the common complaints that come up along with the obvious sense or, indeed, assumption that this process is designed to manage expectations downwards and against the interest of the prospect candidate. There does seem to be a notional ceiling of 25%, or thereabouts, as a maximum increment that any business would seek to allow and this may be irrespective of market forces or whether the candidate was in fact underpaid in his or her former role, so there does appear to be an arbitrary undercurrent. This can also overlook other benefits the candidate may enjoy such as trends around bonus, which may not be guaranteed and therefore end up being very difficult to use as positive leverage.
To add some context, the methods we are talking about here by no means apply across the board. We see it more in the larger corporations, especially banks and GLCs, whereas SMEs and start-ups are more driven by what they can afford, the immediate value to their business and pure market factors. To ensure balance, I also do think we do have to be mindful of the compliance aspect, especially within the financial services sector or GLCs, where perhaps a greater expectation of transparency is required, given the public servant status, so it may be felt extra steps need to be taken to somehow validate salary approvals.
I would add the process of requesting previous salary data can have a positive impact on the candidate's interests, as it can support situations where they may be under-offered. In my experience, it’s certainly not always been used as a way to negotiate downwards. Sometimes smaller, less established companies need the extra data to educate them as to what market rates need to be and this is better served using the pay-slip, rather than the assertions of potential candidates perhaps. Speaking of data, it may be of interest to point out that salary increments don’t appear to have been held back because of this approach. Looking at average salary increases in western economies, average annual salary increases were between 3.0 to 3.5% in 2019, whereas in Malaysia, the average salary increase was 5.1%. That said, on the flip side, Malaysia is simply growing faster and has ground to make up, especially in emerging areas such as Digital, so this may well account for the higher growth rate. As such, we do need to be wary of inflationary influences to keep Malaysia cost effective and sustainable, so could the trend of measuring against prior salaries achieve help this? Possibly so, but probably not the best way still.
All in all, I do believe this is more about principle more than anything and I sense the arguments around personal entitlement to privacy may be the most compelling. Furthermore, at a commercial level, there’s only one gauge for salary and that’s the ‘right’ salary and there is a strong case to suggest this has very little, if not zero to do with the candidate’s prior salary. Key factors for gauging salary are also market factors and perhaps the current company benchmark for that level of role and responsibility, as I do believe it’s sensible to ensure all companies have some form of internal banding model in place, to ensure consistency and internal equity. The final considerations I think, are simply the value this person will bring the prospect employer, combined with a degree of discretion and good judgement. My view is, by using this combination, employers can develop a sustainable salary model without the need to leap to 'prior salaries' as a short-cut approach.
We can’t be too rigid when it comes to the Digital market forces; it’s fast moving and evolving more quickly than other sector, so salaries need to be more fluid to reflect this. Furthermore, since Digital is a globally competitive landscape by its nature, to compete on the world stage and to ensure we keep talent here, we need to keep salaries in touch with global opportunity. On the flip side, supply and demand is putting strain on salaries and scarcity of software engineers is creating an auction room that is not healthy or sustainable, so we need to find ways to keep things within reason.
I will close by highlighting something I’ve always believed and is borne out by the facts; Malaysians are not actually motivated by the best salary alone. Good leadership, culture and the opportunity to learn and develop are, in fact, the biggest drivers, so perhaps we can afford to worry less about the perceived inflationary influence of leaving salary benchmarking to more organic forces of supply, demand, market and employer discretion and good judgement.
If pushed, I would say, on balance it wouldn't be a bad thing for employers to evolve their approach and move away from the practice of requesting prior salaries. I would say this undoubtedly applies to the more onerous practice of requesting 3 months' of play-slips as central to the process. I worry about the impact of this on ‘candidate experience’ and 'employer branding', which is an ever more pressing priority for employers and the impression given, which really needs to be based on trust. Asking for candidates to provide pay-slips in advance of joining is hardly conducive to this. Could we put the current trend down to a residual mistrust or simply industry habit? I honestly feel it’s more the latter these days, which may offer hope for change as viable alternative approaches become more mainstream. I do also appreciate the need to weigh up the company setting and I do think we have to be patient with some of the larger corporations especially in financial services and government sectors, though if the prevailing philosophy is that candidates are simply offered what they are worth then it stops being a problem for all.