In the article below, David Gibbons, Key Account Director & HR & Executive Recruiter at Adams Multilingual Recruitment, outlines the effects lowballing a salary in the final interview stage has on job seekers and employers, especially in this labour market.
What is lowballing in recruitment?
Simply speaking, lowballing in recruitment refers to a proposed salary of a job offer that is lower than what was previously discussed with an applicant or lower than the market average.
Agency recruiters, in general, spend a great deal of time qualifying jobs with companies. This includes the salary and benefits discussion. We discuss the minimum and maximum base salary level as well as the additional benefits on offer, to ensure candidates are within the salary range. If the salary is too low, Agency Recruiters should warn a company that it might be difficult to find the required talent at that price.
We also establish the salary and additional compensation expectations of our candidates to ensure that both them and a client get the best possible outcome.
What is the reason for offering lower salaries?
The main reason for making unexpectedly low salary offers is that many hiring managers are still under the impression that this is a ‘Buyers’ Market’ or an ‘Employer-driven Market’, and they like to ‘test the water’ with a low salary offer to begin with. However, applicants can quite easily be offended by this approach, and for a good reason.
While the job market, especially in the hospitality and tourism industry, suffered under the pandemic and many people lost their jobs, the Dutch labour market has recovered and is experiencing the lowest number in unemployed people in over 10 years. It is also noteworthy to mention that many foreigners who have lived and worked in the Netherlands have decided to leave to be in their home country and many others have prioritized education overwork in times of uncertainty. This all has resulted in the pool for talent in the Netherlands to shrink drastically, and as the numbers of vacancies are rising, job seekers find themselves in an advantageous position. Moreover, this country is experiencing the strongest spike in inflation in two decades. Therefore, applicants that receive a lowball offer are faced with rising costs, many job opportunities and an offer that does not recognize any of these truths.
What should you expect with a lowball offer?
1. Non-negotiation of a lowball offer
A job seeker has often gone through a long and elaborate process to arrive at the salary negotiation stage, carefully selecting the company and examining their own experience and skills. Having the hiring manager undercut the candidate, will make them quickly drop that opportunity, not even considering a counteroffer and focus on the other processes they are currently involved in. In the current market quality talent have multiple opportunities. They see little point in negotiating if they feel that the offer is derisory.
A low salary might not only insult a job seeker, but also discourage them and make them doubt their own experience and skills. This impact is not very obvious to the person making the offer but will leave a lasting mark on the candidate’s confidence.
2. You get an unmotivated employee
If an applicant does however accept an offer that is clearly under their expectations, there are risks involved for the employer. Someone that knows they deserve more than they are paid for, will most likely not enjoy the work they are doing as much as someone that is being paid fairly. The initial salary will also establish the tone for the relationship between the employee and employer. This employee will also be less inclined to perform to the best of their abilities or may leave at the earliest possible opportunity for an employer who offers what they want and expect. If you offer the chosen candidate a salary which truly reflects their experience and value in the current market, it will be an effective incentive for them to carry out their responsibilities in a satisfactory manner and even push themselves to achieve more.
3. You get what you pay for
If you want to attract the top talent, instead of lowballing, you have to offer proper compensation. With a lower salary, you can attract candidates who may not have the skills, experience or motivation you need and you probably have to compromise along the way.
In case you do have additional budget to train someone in a junior position, then you can opt for that option. But bear in mind that this not only means additional costs in terms of training material and coaches, but also the time it takes them to reach the level you need. Not to mention excessive stress on the employee who needs to upskill very fast.
4. Short-term gain vs long-term loss
Maybe the candidate accepted the offer because he or she was in a difficult financial situation and felt that they don’t have any bargaining power. But as soon as they realize that their compensation does not match the value they bring, they will start looking for a new job. This can be only months from onboarding a new team member! Employers will then find the budget to offer the departing employee more money to stay in order to avoid additional costs, but there is no guarantee that they will succeed. So instead of cutting costs with an employee who accepted a lower salary, employers risk losing additional money by starting the hiring process all over again.
5. A hit to the employer branding
The above-mentioned consequences of lowballing a salary during the offer stage will result in the hit that your reputation will take in the short and long term. Strong employer branding means respecting your employees, which results in applications coming your way instead of having to hunt for talent. Whether you want it or not, past and maybe even current employees will leave reviews of the company on social media, and on platforms such as Glassdoor that even includes the salary range. Seeing a below-market standard salary range will have many qualified job seekers not even consider you as a potential employer.
Naturally, there are reasonable explanations as to why an employer is not offering a higher salary at the moment, make sure to clarify why that is the case. Try to avoid losing talent at the last hurdle, lowballing is rarely worth the money you are saving.
Do you want to hire new people, but you don’t know what salary to offer them? Get in touch with our Business Development team!