So this happens sometimes. More often than it should, so I want to discuss this topic in this article.

Hiring Managers want to pay new employees below what the market will pay these new employees for their skills.

A couple of things motivate Hiring Managers to do this:

  • They want to save money for the company and thus look good for their leadership by hiring below market.
  • Being below budget may help them get a nice bonus or even a promotion.
  • Another reason is just pure ignorance. They do not know how much candidates are worth in the market.

It is our job at NewConfig as their recruiters to advise them that they are paying below market. Sometimes they take our advice and are wise to do so. Other times they do not, and this article explains what happens when clients do not take our advice. Experience is the best teacher, but they have to go through the experience first. In this case, the experience is very painful. (Read more about this in our article: 3 Hiring Manager Mistakes To Avoid At All Cost).

Let Me explain.

Let’s say you are the Hiring Manager, and you hire a candidate for an $80,000 base salary, but the person is worth $95,000 to $100,000 in the market.

The person may not have done their research. Or you were the first company that interviewed them. Whatever the reason, you lucked the short term.

If you take advantage of this situation and refuse to increase the person’s salary, then you will lose long term (Read our article about: Why we are honest with candidates about salary).

You see, in three months, six months, or even a year, other recruiting agencies will reach out to this new employee of yours. And they will offer them exactly what they are worth in the job market: $95,000 to $100,000.

Then this person leaves your organization.

You will be left with a void. You will need to again pay recruiting fees and take time out of your day to recruit and interview candidates.

Furthermore, things may become emotional for you, and you start thinking, “I paid the last person $80k; I will not pay more this time around”.

Emotions come into play.

Then your position remains open for weeks, months, or even a year.

In the long run, you will lose much more money than the $15,000 to $20,000 you saved when you hired the first candidate.

You will lose this money in recruiting time, recruiting fees, and lost business since you do not have that person in place. You will stand to lose between $30,000 to $100,000 long-term or more as this problem stays open.

So before you make this mistake, be wise. Listen to your recruiting counsel, AKA me 🙂 Do not underpay great candidates.