What you Need to Know about Salary Ranges

Advice for Job Candidates from a Compensation Design Professional 

My team's job is to help companies develop and improve their pay practices, but I'd like to flip the script and write a post that’s geared toward helping candidates & employees understand a bit of what goes on behind the scenes, especially as more companies will be publishing salary ranges in their job postings in the coming months.

This information comes with these acknowledgements:

• Everyone deserves to be paid competitively and fairly (and as highly as they can be, if that is their goal).
• No one should have to go through hours of interviews before knowing compensation information about the role. 
• My experience is mostly limited to the broader tech market, where the team spends most of their time on compensation design for full-time and salaried employee roles. 
• My experience is with well over a hundred companies, all of whom are trying to pay people fairly - but I know there are plenty of bad actors out there who purposefully lowball employees, and the perspective offered in this post is not meant to deny or downplay those cases.

The purpose of these observations is to hopefully provide some context and clarity about the process (and common pitfalls) from the companies that do have candidates’ best interests in mind, which is a lot of them.  So here goes!

For most roles, there is no perfect number.  One thing I’ve noticed when fielding employee questions (and reading Twitter threads) is that there seems to be an underlying assumption that companies have perfect information about the salary they should offer a candidate based on their exact skills and experience. 

Even the most robust market data has a range, and sometimes there isn’t a strong match in the data to a candidate’s specific blend of skills. In addition, many smaller companies may be hiring for the role for the first time, or don’t yet have access to these larger compensation datasets, and find themselves having to speak to a few early candidates to learn or validate what some of those real-time numbers might be.

…but there is strong compensation information out there.  Even though not every role has a ‘perfect’ number, most larger companies (and plenty of smaller ones) will have a defined compensation strategy, which means there is likely a data-backed salary range for your role or general job function.  

Where you fall in that range should be a combination of: 

• Where you are in your career.  A common misconception is that if you aren’t offered the top of the salary range, then you’re being shortchanged. At many companies, where you fall in a salary range is partially a function of where you are in your career relative to that level.
  
  If you are new (or new-ish) to the level and the expectations, you may be offered a salary in the lower half. The idea being that you’ll spend time in the position, getting increases and growing in your role before getting a promotion, without going ‘above range’.  Conversely, if you are coming into a position where you have already been doing that exact role for a few years and will soon get promoted, you will likely be in the top half.  

Where we see friction is when the company goes to market looking for a less experienced profile than the candidate they end up interviewing (and loving).  It takes a conscious step in the process for the hiring manager and the company to get on board with hiring a more senior/more expensive profile than they had originally intended.  Or they may not really have the ability to stretch the budget in that way, and just hope you like the opportunity and will take the offer.

The other similar friction point occurs when a hiring manager wants, say, a “Director of Marketing,” but they want to hire a person who has been doing that exact role for three years at a similar or larger company … and is surprised when that person wants the top end of the salary range, or requests the compensation or title of the next level up in order to leave their current position.

• Where you are relative to peers within the company. Most companies will try to manage internal fairness as well, making sure you as a candidate don’t come in much higher or lower than similar employees on the team. This can be a great thing, as it often reduces pay equity issues across demographics like gender and ethnicity, and is just a generally fair way to manage compensation at a company. 
  
  The pitfall is that sometimes employee pay has not kept pace with market salaries, and it hinders offering the candidate a higher salary, as they’d be significantly out-earning their new peers. Sometimes your request for a higher salary than anticipated can be part of a data story that helps a recruiter make a case for higher pay, or to get the companies’ market competitiveness reviewed. 

• Any special skills or experience you’re bringing to the table.  The two factors above are often balanced with any more unique situations, like whether you have a skillset that is unique relative to peers. 
  
  However, in order to warrant higher pay, that skillset needs to be specifically relevant to the company you are joining (for example, past experience scaling a particular type of team or platform).  It’s not usually about whether you can speak another language or have a more advanced degree, unless that’s specifically relevant. We’ve often seen confusion from candidates who come from industries like academia or the public sector where there is an expectation that a specific number of years of experience or type of degree means a set amount of increase in pay.  In the tech sector (and many other industries), this is usually not the case.

‘Market’ is not Facebook (unless you’re Facebook).  The above section talked about where you might be paid within a salary range, but this section covers what (and how high) that salary range might be. 

In general, where a company sets its pay rates is going to be a function of their size, financials, and general compensation philosophy, which includes how they value the other aspects of total rewards, like equity, benefits, or development.

The big players in the market (the group often referred to as ‘FAANG’, or Facebook, Apple, Amazon, Google, Netflix…. and others) are ones that target the top end of the pay market for any given role or job function. These companies report tens of billions of profits every year, if not much more.  Smaller tech companies -- and even larger public ones -- often don’t have the finances to support the same rates. What’s surprising here is actually how close to these rates some VC-backed and mid-sized firms can get; there’s actually a handful of overlap between some of the salary ranges between these companies.  

I think if there’s one thing these smaller companies would want you to understand is that they are not trying to lowball you by not matching the compensation of a top five (or top twenty) company.   If max comp is what you’re looking for… go for it!  But once you have a competitive offer from a company, it’s a choice of balancing the compensation package offered and the opportunity itself: it could be the professional growth, the mission, the culture, the people or anything else that you might be valuing outside of pay.

Hopefully this post helped shed some light on the tech compensation market. There’s plenty more to cover too - we’re not even diving into the complexity of benefits, equity, and other comp components - perhaps for another day! Feel free to leave a note in the comments or let us know what you think.