Are last drawn salaries essential in hiring?
It has been a long-standing tradition for hiring managers to screen candidates effectively through various means – skills assessments, multiple rounds of interviews, and it has been common practice that last drawn salaries and payslips were often requested to gain visibility of past salary ranges of an individual.
Considering this, we dig deeper on why this have become commonplace in the workforce, and the necessity of having this information. In a recent announcement made by Minister of Manpower (MOM) Singapore, Josephine Teo, stated that:
“There are no rules stating that job seekers must declare their last-drawn salaries, and employers cannot insist they do so” on Thursday (Jun 4).
What is the rationale of this move?
Employers who use last-drawn salaries to screen job seekers risk losing out on good candidates who are prepared to adjust their salary expectations, especially in current times, said Mrs Teo. "It is similarly unwise for employers to overlook the longer track record of the applicant, and make an offer based solely on the last-drawn salary especially if the last-held position was an interim one," she added.
What are the implications – benefits and consequences – of this move? We hosted a virtual roundtable with Human Resources (HR) experts across various industries to share their opinion, moderated by our Regional Sales Director (South East Asia), Alena Salakhova, and Sales Team Manager of Huxley Singapore, Jeremy Tan. You can watch the full session below which was not only engaging and very insightful.
Payslips were never a mandatory aspect of hiring processes, but a tradition
There was a common consensus during the roundtable that the requirement to submit payslips or last drawn salaries were never made mandatory.
Shervon See, Senior HR Specialist from Cathay United Bank, shared that if someone is coming onboard with the bank, they understand that they would have a budget to work on, but it is never a disclaimer or a fixed policy to declare last drawn salaries. Nonetheless, she agreed that it was useful information to have in terms of managing expectations on increment percentages. It helps with gauging and safeguarding the company to manage budgets realistically.
Steve Lin, HR Director of Pramerica Financial, agreed that it was not part of the hiring process, but it is essential in terms of managing internal equities and benchmarking. Nonetheless, he too felt that the government is encouraging a positive move, and not an unforeseeable one given that it was first regulated in other countries and states in the US like New York, Pittsburgh and New Orleans.
In Singapore, most companies are willing to pay up to 20 per cent above last-drawn salaries, particularly for senior or specialised roles and for talent that are hard to come by in an industry. Traditionally, it is also common for companies to ask for your previous payslips to verify your previous salary.
A question of privacy and trust
Claire Mear, SThree’s Head of HR for the Asia-Pacific and Middle East & North Africa region, posited that it might be a trust issue on the part of the hiring company. It is thus essential for hiring managers to evaluate their hiring processes by asking – ‘if we are benchmarking a candidate based on their cash-worth, will this impede our ability to break into a wider pool of people to hire?’
It is important to have a culture of trust in any candidate that comes for an interview, and we should be open to the idea of them not wanting to declare their payslips as this falls in line with privacy of information as well.
Education and feedback to senior management
Eugenia Gan, Head of HR from Clifford Capital Pte Ltd shared that she typically ask for payslips as it is useful information in terms of education. This is especially so when the company is hiring across different sectors, as it provides more perspective on how salary packages are being structured so that this can be fed back to the management team. This would ultimately allow them to improve their benchmarking when it comes to providing allowances and additional benefits as well. It supports them in negotiating with candidates amicably and also acts as a form of education to potential candidates on the rational of how they structure their pay packages.
Lin added to his point that without understanding total employee cost, it is also difficult for companies to make a sound judgement. Ultimately, HR specialists will need to make a mindset shift with the government driving this, by using other benchmarks as a gauge.
Maggie Peh, Assistant Manager of Donna Beauty Pte Ltd also shared that it is very dependent on the type of industry you are in, and some may be encouraged to share expected salaries. There should however be other benchmarks – from actual qualifications, skills and experiences with relevance to the job role could help in forming the salary packages.
Gan also highlighted that while asking for payslips is not unilaterally done by HR, it’s still important information when assessing the budget for hire. Nonetheless, the budget should never be the first filter for hiring candidates, and it is up to our discretion whether we want to benchmark a candidate, and if the cost of hiring outweighs the potential cost of retention.
What is an alternative solution towards asking for last drawn salaries?
All in all, there are other factors to consider when evaluating the worth of a candidate. This includes:
- Work scope – conduct skills tests and assessments
- Existing and changing market benchmarks
- Candidates' hard and soft skills
- Candidates’ experience level and potential to achieve business goals
- Internal equity (what others with a similar scale of job responsibilities within the organisation are paid)
- The company’s manpower budget
- Existing employment terms
- Prevailing economic conditions
Moving forward: Enticing the new generation
How companies would go about re-evaluating their hiring processes will determine their ability to attract upcoming talent to remain competitive and sustainable in the long run. The speakers reached a consensus that all in all, it is a two-way traffic – if companies insist on declaring payslip and a candidate refuses, we then have to ask ourselves if we still want to pursue the candidate to work on his or her expectations and have a conversation, rather than ruling out their hiring chances altogether.
Is your company looking to evaluate certain elements of your hiring processes or would like to find out more about how you could improve your hiring process? Do reach out to us via the form below. For other market insights and updates, follow us on our LinkedIn page.