Best & Worst Practices in Hiring: Bargain Shopping For Employees

By Jennifer Graham

This is a new series that will highlight approaches employers take that either attract or repel top talent. Today’s topic addresses a Worst Practice:

Bargain Shopping for Employees

Lucy Davis* took a ten-year break from her career in media sales while she raised two kids. Re-entering the market after such a long hiatus was challenging. Lucy was looking for a job running an outside territory similar to the job she had left, but the only offer that came her way was for an Inside Sales role that paid $64k – a salary substantially lower than the $70k she had been earning ten years prior.

Still, Lucy saw this as her ticket back to work and accepted the job. After a year, she approached us with interest in a position nearly identical to the one she had before she had left the workforce—Territory Manager. Lucy had researched the current salary rates for this position and knew the appropriate range for the job in today’s market was $85-95k.

She was looking forward to a healthy bump that would get her back to her pre-baby level; however, when the offer came, Lucy was sorely disappointed. The new company offered her $70,400k – a full $15- 20k less than what she was expecting. When Lucy questioned the rationale of a salary so far below the norm, she was told that HR was basing her increase on her current salary, not on the responsibilities of the job. They stated that a 10% increase was standard and that Lucy’s request for a 25%+ bump was excessive. The offer would stand.

Reluctantly, Lucy accepted the position because it gave her the opportunity to get back into outside sales as well as a higher salary, but she kept her eyes open for a position that would pay the market rate. Six months later she found one and left, leaving her employer to fill the same sales position twice in one year.

Why Bargain Shopping For Employees Is A Worst Practice

On the surface, a standard 10% increase seems fair. Offering a consistent increase to all candidates who apply for your jobs may seem like an equitable approach. (Of course, sticking with a rigid percentage increase for every hire means that candidates who are overpaid according to market standards will need to be given 10% above their already bloated salary.)

It is also tempting to see an underpaid candidate as a bargain, like finding the one leather sofa on the showroom floor that was accidentally marked with a clearance tag. If you can get this person for less, keeping your budget a little fatter, then isn’t that just good business? The problem with that thinking is that, unlike that mis-marked sofa, candidates are sentient beings with emotional drivers such as pride, ambition and a sense of fairness. A disgruntled sofa can’t leave you and walk into someone else’s living room. An employee can.

No one wants to feel undervalued. Underpaying can save money in the short run, but a candidate who doesn’t feel appropriately compensated will– at least– be resentful which could affect productivity and –at worst–look elsewhere for a company who will pay the going rate. And, an open position and a new search for a replacement are expensive.

Bottom Line

Forget the bargain shopping and instead, play fair. Determine a salary range that is commensurate with the responsibilities of the role, and make offers that fall within that range. If that means you provide a candidate with a 30% pay increase, just imagine how happy and grateful that new employee will feel about coming to work for you. Gratitude translates into loyalty, and loyalty into productivity. By making a generous offer, you have created a reliable new employee, rather than someone who spends their lunch hour scrolling through online job posts. After all, we all know, you do get what you pay for.

*Name changed for this article

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