5 Tips on answering questions about compensation expectations

At some point in the interview process, you’re bound to be asked about your salary and compensation expectations. If you’re not prepared, that question can be difficult (and awkward) to answer. But doing your research and being confident in your skills and background will help you answer that question fairly, accurately, and professionally, and ensure that you are paid what you’re worth.

In this article, we’ll discuss the ins and outs of dealing with the questions about your compensation expectations, including

• Why do potential employers ask about your salary expectations?

• Why it’s important to answer a question about compensation expectations

• How to answer questions about your compensation expectations

• Example answers to compensation expectation questions

Why do employers ask about compensation expectations?

Employers ask potential employees about their compensation expectations for several reasons. First, they want to make sure that the salary you expect is in line with the amount they have budgeted for that position. They also want to make sure you're not overqualified for the position — if your salary "ask" is much higher than they were expecting, they may think you have too much experience.

Other reasons they may ask these questions are:

• To see if you’re a good match for the company. If your expectations align with the company, they might be more apt to make you an offer.

• To gain some personal insight. Your answer to the question about compensation expectations can give hints as to how you view not only the industry as a whole but the company as well. They can also gauge how well you know the industry and if your response is in line with industry standards.

• To determine if you’ve done your research. Employers are more interested in people who understand their industry as well as appropriate compensation levels.

Why you should be willing to discuss your compensation expectations

As the saying goes, “time is money,” and most companies ask about your compensation expectations because they don’t want to waste their time (or yours) on the interview process only to find that your expectations are wildly different from what they’re willing to pay. However, if many of the applicants are requesting a higher salary than they’ve allotted, they have evidence to perhaps increase their salary for that job. 

Often, hiring managers ask applicants about their compensation expectations to see if they know their value in the marketplace, taking into consideration their skill level, experience, and education. Knowing your worth is vital in determining your offered salary, and that you won’t earn less than you deserve.

Hiring managers may also ask about your expectations to gauge your experience. They want to see if you’ve done your research, as workers with more experience and abilities have a higher value in the marketplace and therefore expect to be paid as such.

5 Tips on answering questions about compensation expectations

This is one of the trickier questions you’re likely to encounter in an interview, perhaps even more so than the dreaded, “So…tell me something that’s not on your resume." While you want to be paid fairly, you have to strike just the right balance. You don't want to give too high a figure (leading the company to think they can't afford you) but you also don't want to lowball yourself and risk not getting paid what you're worth.

1. Do your research

There are different ways to answer the compensation expectation question (which we’ll discuss later) but the first thing you need to do is decide what your ideal salary and benefits look like. Start by firing up your favorite search engine and type in things like job title, state (or region), and how much experience you have. Free resources such as Payscale.com, Salary.com, and even the U.S. Department of Labor are extremely helpful sources of information for salary information.

2. Determine what your needs are

Once you’ve done your homework, determine what you need in the way of salary. Budget yourself, and take into consideration things like transportation, childcare, housing, and so on. Make sure the salary you’re requesting meets those needs and then some, so you’re not living paycheck-to-paycheck.

And don’t forget the benefits portion of the compensation package. By determining what’s important to you, you can consider paid time off, retirement plans, bonuses, or tuition assistance. Doing your research (including the company itself) will help you put together a good sense of what kind of compensation package will work for you. 

3. Don't get locked into a number

When it comes to asking for your expected compensation, flexibility is key. You might be better off stating a salary range rather than a fixed number. If your desired salary is $52,000, you could offer, "I'm looking for a salary between $50,000 to $62,000 a year for a 40-hour workweek." Be aware that unless you have a lot of experience, you'll probably be offered something on the lower end of your range, so make sure you don't dip too low. 

You can also demonstrate additional flexibility by stating that you’re open to more negotiation by mentioning other things that are important to you, such as work-from-home opportunities, and other compensation options. These benefits can be worth a lot and can boost your overall total compensation.

4. Postpone answering the question

Maybe you’re just not ready to answer questions about your compensation expectations yet, and that’s valid. You’ll have to answer it eventually, obviously, but putting it off can give you a little more time to come up with a fair and desirable amount. You can respond by saying, “I’d like to learn more about the position and the company before I can provide an equitable salary expectation.” This tells the hiring manager that salary and compensation are important, but you need a little more information first and would be more comfortable sharing your expectations at a later time.

5. Turn the tables

Another tactic you can use is to ask the company what their range is, politely and professionally, of course. Saying, "I'd really like to learn more about the position before discussing my compensation expectations. May I ask what the salary range is for this job?" will show them that the position, and not just money, is what is important to you. If the range corresponds with what you're looking for, great! If not, and you're still interested in the position, you can open the door to possible negation.

Examples of answers to the compensation expectation question

Negotiating for fair compensation in the workplace can be challenging. Knowing what to say can ease any apprehension and make the process easier. Here are a few examples of things you can say in response to your compensation expectations:

EXAMPLE 1

I’m still looking to get a better handle on the job duties and responsibilities for this position, and I’m hoping to do that in our discussion. But I understand that the salary range for comparable positions is between $50,000 and $65,000. Considering my skill level, experience, and educational background, I’d anticipate an offer in that price range.

EXAMPLE 2

I'm open to negotiation regarding my compensation expectations, but considering my previous positions as well as my skills and education, I believe a salary between $50,000 and $65,000 is reasonable.

EXAMPLE 3

I’m looking to make a salary in the $50,000 to $65,000 range, considering my background and industry knowledge. However, before settling on a number I’d love to learn more about this company, job expectations and goals, and the overall corporate environment. I understand that you offer tuition reimbursement, which indicates to me that you value continuing education, which is important to me as well. For the right position, I am willing to be flexible with the salary.

When interviewing for a job, remember that you are a valuable commodity. Defining what makes you a perfect fit for a position will help you get compensated fairly. When you answer the question about your compensation expectations, you’re telling a potential employer why you’re worth every penny and helping yourself advance in your career.

Key takeaways

1. Employers ask potential employees about their compensation expectations for several reasons, including their budget and your qualifications. 

2. Hiring managers may ask about your expectation to determine if you know your value and to gauge your experience.

3. It’s important to do your research. Understand the salary range for similar positions, ask your network contacts, and determine your needs and budget.