Compensation can be a tricky subject. It’s uncomfortable for a lot of people, and there might be laws that govern how you can have that conversation (for example, in California and a number of other cities and states it is illegal to ask a candidate what their current compensation is, and you are legally required to disclose a salary range for a position if they ask you). However, compensation is an important criterion for all parties, and it has to be discussed—but when?
Bringing up the issue of compensation too early can be a distraction for you and the candidate, pulling attention away from more important issues. That said, there’s a risk that if you don’t broach the subject early, you can both waste a lot of time working through the rest of the process only to realize later that what you can pay is incompatible with what the candidate needs. For example, if a candidate is moving from a large, well-paying company to a startup where cash compensation might be much lower, it’s important to bring this up early to avoid surprises later. And of course, even if your plan is to delay that conversation, it’s not uncommon for a candidate to bring it up before you’d planned to.
Furthermore, some companies run a candidate through their process, extend an offer, and have the candidate reject the offer based primarily on compensation, without either party having ever brought up the subject. Sometimes the company isn’t even aware that compensation was the problem; often, this is because both parties are uncomfortable discussing it.
One way to avoid such situations is to give the salary range early and ask the candidate if there is enough overlap with that range to continue the conversation.
story “The best way I’ve seen this done is giving a range for the role in the initial phone call. This way they know the lower bound and can make a determination based on that. In one situation I was told the upper bound, and they noted it was rare for that to be offered to a candidate. That upper bound was my lower bound, so I knew right away it wasn’t a fit.” —Laurie Barth, Staff Engineer, Gatsby
If you are certain that your offer will be the fair market rate for a company of your stage, it’s fine to ask the candidate whether being paid fair market rate works for them. (Unfortunately, some companies will claim that they are paying market rate, but aren’t, either knowingly or not.)
caution Avoid asking specifically about a candidate’s compensation needs. Whether they have financial obligations that necessitate a certain monthly income may be uncomfortable for them to discuss, and it’s not fair for you to ask this of some candidates and not others—you also don’t want to skirt any legal issues with your questions. However, it is appropriate to ask whether the candidate has a strong preference on cash vs. equity.