More than three in five employers have encountered candidates with unrealistic salary expectations in the last 12 months, according to new research. How should HR respond when a candidate asks for too much money?

Salary expectations among the Australian workforce have not quite caught up with today’s economic reality, suggests a recent report by Robert Half. 

Based on surveys of 300 hiring managers from companies across Australia, Robert Half’s 2023 Salary Guide revealed that 61 per cent had interviewed a candidate with unrealistic salary expectations in the last year.

According to the respondents, the average salary request was 16 per cent above the amount initially offered. Around one in 12 employers said they had seen a candidate request more than 40 per cent higher than the initial offer.

Just as candidates were not afraid to ask for a premium salary, employers were not afraid to turn them down. Just 41 per cent of candidates were successful in securing more than was originally offered, and 14 per cent of employers withdrew a job offer without entering into negotiation because of the candidate’s high salary expectations.

Talent market shifts in favour of employers

Given the rapid shift in the economic and talent landscape in the past year, it’s unsurprising that candidates’ expectations are somewhat out of sync with the reality of what’s on offer, says Nicole Gorton, Director at Robert Half.

“We are experiencing what I would call a re-education of the market,” she says. “Unemployment is still low, but the borders have opened up, and we’re starting to see more talent, skills and expertise re-enter the marketplace. 

“[As a result], combined with the fact that interest rates have shifted, what we’re seeing now is that organisations are starting to magnify their efforts on cost management – on making sure that their revenues and workforce usage are realigned to the business [objectives]. And so any movement is a lot more cautious, with a re-focus on the bottom line.”

“If you are able to analyse data and add value with that data through storytelling, and be able to use it to predict the future of an organisation, that is really powerful.” – Nicole Gorton, Director at Robert Half

As well as being more conservative with their talent budgets, organisations are also increasingly looking at ways to optimise their existing workforces through upskilling, says Gorton. Employers are starting to realise the cost-saving and cultural value of internal career development, and external candidates therefore have less bargaining power.

However, recent developments such as the rise of AI and a huge surge in cybercrime mean that candidates with experience in these fields will be better placed to negotiate a lucrative salary.

“If you are able to analyse data and add value with that data through storytelling, and be able to use it to predict the future of an organisation, that is really powerful,” she says.

How should HR respond to an unrealistic salary request?

Rather than a simple ‘yes’ or ‘no’, it’s essential to approach an unreasonable salary request thoughtfully to preserve your employer brand, says Gorton.

“Particularly within HR, what we’ve got to do is understand the ‘Why?’ Where’s it coming from? Did they pluck it out of thin air? Did they hear that somebody got that salary doing a similar job somewhere else?  Because you can’t really respond unless you know where it came from,” she says.

Gorton advises HR to help candidates accept the reasoning behind a rejection by highlighting industry trends and salary benchmarks. 

It’s also a good idea to highlight how differing work setups at your organisation might impact remuneration. If the candidate previously worked in a high-risk, high-pay environment, they may be more likely to ask for an unrealistic pay rate. If that is the case, it’s important to reinforce the benefits that exist outside of pay.

“If [the request] was based on their previous salary, then I’d find out what is pushing them from their existing role,” says Gorton. “Ask them why they are leaving an organisation, because that tells you why they would then want to join an organisation.”

Recruiters should not underestimate the value of benefits packages in attracting top talent. Robert Half’s research found that almost two-thirds of employers have had a candidate accept a job offer because of their company’s benefits package, even when they were unable to meet the candidate’s salary expectations.

According to Gorton, there are two benefits in particular that are driving candidates to choose one employer over another.

“The biggest one is flexibility laid over hybrid work,” she says. “The ability to work hybrid, the ability to access different working hours or different working days, depending on their stage of life and what they need, is really important [to candidates].

“The second one would be access to education, such as courses to upskill, opportunities to learn about new technology tools and access to a mentor. As most people should know by now, if you give someone a mentor, whether it be internal or external, their engagement goes up and their productivity goes up.”

Beyond these perks, employees are also increasingly placing more emphasis on wellbeing and social responsibility when it comes to looking for an employer, she says. 

“It all comes down to what is important to people. And that [might be] a company’s approach to diversity, equity and inclusion, or their approach to ESG [Environmental, Social, and Governance]. [HR] should always look at what motivates the candidate in their job. And money doesn’t always talk in isolation.”

Having to deliver bad news to a candidate or employee can be an uncomfortable experience. AHRI’s short course will arm you with the tools to effectively prepare, plan and conduct a difficult conversation and achieve the best possible outcomes while maintaining harmonious working relationships.