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How to Discuss Salary in a Job Interview

Written By Rachelle Enns on May 4th, 2020
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Rachelle Enns
Rachelle is a job search expert, career coach, and headhunter who helps everyone from students to fortune 500 executives find success in their career.
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In this guide, MockQuestions teaches you how to talk about salary and compensation in a job interview. We discuss why it’s a challenge when an interviewer asks, What are your salary expectations? We show you how to do proper research to know your worth and then teach you how to answer the toughest salary-based interview questions.

IT’S HARD TO TALK ABOUT MONEY

What are your salary expectations? Gulp.

This question is notoriously difficult to answer because there is a lot on the line.

  • You worry about overselling yourself

  • You worry about selling yourself short

  • You worry about eliminating yourself as a viable candidate

  • You worry about putting yourself out of the company’s salary range


Talking about salary can feel like a bad game of poker. Will you show your hand first, or will they?

Even more challenging is when a company asks you to state your salary range during the online application process. How can you know what to ask for when you haven’t even learned about the position yet?

Developing your ‘ask’ will make salary questions much more comfortable to approach. You should always know what you are asking for, why you are asking for it, and how you will ask for it when the time comes to negotiate your pay structure.

SALARY VS. COMPENSATION

There is a significant difference between talking about salary and compensation. As part of developing your ‘ask,’ it’s essential to focus on the big picture. Focusing only on your base salary could mean that you are short-changing yourself in other areas.

SALARY: Your salary refers to your regular paycheck only. The term ‘salary’ does not include any non-cash compensation you may be receiving.

COMPENSATION: The sum of your salary and the value of any employer benefits.

Compensation can include:

  • Base pay; whether it be salary or hourly wages

  • Commissions you are eligible to receive

  • Overtime pay

  • Tips, if you are in a service-based role

  • Bonus’ whether they be monthly, quarterly, or annually

  • Recognition based bonus’ or awards from contests

  • Stock options

  • Vacation pay

  • Benefits packages including retirement

  • Health benefits

  • Most additional non-cash benefits


Let’s break down an example to show how focusing on overall compensation is a beneficial practice.

Situation A: James is offered a salary of $65,000 per year from Company A. He will receive 2 weeks’ paid vacation time and a standard health benefits package.

Situation B: James is offered a salary of $62,000 per year from Company B. He will receive 4 weeks’ paid vacation time and a generous health benefits package.

When we initially look at the numbers, it seems that Company A is giving James the most generous offer. However, looking more closely, we can uncover the following:

A typical full-time salaried employee is paid for 2,080 hours per year, based on a 40-hour workweek with 52 weeks in a year (40 x 52 = 2080).

At $65,000 per year, James is earning the equivalent of $31.25 per hour (65,000 divided by 2080). This means the 2 weeks paid vacation from Company A is worth around $2,500 (80 hours x 31.25). Therefore, Company A’s total compensation could be viewed as approximately $67,500 (65,000 + 2,5000).

Using the same calculations, Company B is offering the equivalent of $29.80 per hour. This makes their 4 weeks paid vacation worth around $4,768.00. Rounding up, Company B’s total compensation could be viewed as approximately $66,800.

Company A and Company B’s offers are actually only $700 apart from each other.

Next, when comparing Company A's standard health benefits package to Company B's generous health benefits package, we see that Company B is the better deal for James.
We recommend making these calculations for yourself before negotiating a salary with any hiring company.

COMMISSION STRUCTURES

There are many terms thrown around when it comes to compensation types and payment structures. A significant part of figuring out what your compensation ask is going to be is understanding what you will and will not accept.

Some terms you may hear from a hiring company include:

BASE PLUS COMMISSION: In a base plus commission structure, you will be encouraged to make the bulk of your paycheck based on your results. An example of base plus commission is if the hiring company pays $35,000 per year plus a 2% commission on all sales. It’s important to understand if the commission % is coming from the initial sale amount or if the hiring company is actually offering a commission % after profits.

100% COMMISSION: In a commission only position, you are expected to make all of your money based on sales results. Just like a base plus commission structure, you must understand if your commission earnings are on sales, profit, or another benchmark. Also, you need to know how often you will be paid (weekly, bi-weekly, monthly). With 100% commission jobs, there are often caveats to when you earn your commission. For instance, in new home sales, you may receive your commission only after the homeowners take possession, not when the contract is signed.

DRAW AGAINST COMMISSION: A draw against commission is a 'guarantee' that you will earn a regular paycheck despite relying on commission earnings. It's like an employer 'pre-paying' you for commissions they know you will make. For instance, if you are a new sales rep for a software company, it could take you up to 9 months to start earning a regular flow of commission. The hiring company 'pre-pays' you a draw to keep you financially afloat until you are making enough sales to live on 100% commission alone. Some companies will offer a draw for the first 12 months and then move the employee to a 100% commission structure. There are a variety of draw types including, New Hire Draw, Recoverable Draw, and Non-Recoverable Draw.

As you can see, it is critical that you fully understand the hiring company’s pay structure before you begin to negotiate a compensation package.

QUESTIONS TO ASK YOURSELF

Once you have figured out the pay structure you are willing to accept (salary, base salary plus commission, draw structure, 100% commission), think about what that will look like for you, financially. Ask yourself:

Is salary the most important factor when taking a new job?

How much emphasis are you putting on the cash versus the overall picture when considering a new position? In addition to compensation, there are many other factors in a fulfilling career. These other factors may include:

  • Work/life balance

  • Amount of travel required

  • Overall medical and health benefits

  • Additional perks such as car allowance, cell allowance, or a spending account

  • Your level of interest in the industry

  • The amount of vacation time offered

  • The type of clients you would be working with

  • The location of the company

  • Future career growth opportunities

  • The size of your new team or department

  • The new company's reputation

  • The overall company culture

  • The stability of the industry


Take your time to list the factors that are most important to you when considering a new job offer.

HOW SALARY QUESTIONS ARE FRAMED

Some of the most common money-based interview questions include:

  • What are your salary expectations?

  • How would you like to be compensated?

  • What are you earning in your current position?

  • How much money do you want to make?


It’s important to remember that, in many states, it is now illegal for hiring authorities to ask about your pay history. The laws against requesting salary history information are to protect people from pay discrimination.

For instance, in California, employers are banned from not only seeking a candidate’s pay history, but they are also banned from using any pay history information to determine a new hire’s pay.

For this reason, the best way to approach the money question is to have a very clear idea of the following points:

  • What you want to make

  • What you need to make

  • What your minimum threshold is

  • What the market is telling you about your job title and industry in your region


By understanding your ask, you will give the hiring company a solid idea of what you want to see in a competitive job offer. By being upfront and transparent, you are helping the hiring company abide by the laws in their region.

DO YOUR RESEARCH

If you are newer to your career and are unsure of what a fair salary ask may be, there are many reliable salary calculators available online.

You’ll want to find answers to a few essential questions:

  • How competitive is the job market for this role?

  • What’s the market range for this kind of role in the industry?

  • Where do you fall within that range?

  • Does compensation vary geographically?

  • What organizations pay more than others?

  • Does this company have a reputation for paying above-market value?


TOP RESOURCES TO RESEARCH SALARY

Our favorite online resources for researching salary:

PAYSCALE: With PayScale, you can search their vast database to figure out what you may be worth based on your region, job title, and industry. They also have a robust research section on their website where you can dive deeper into topics such as the gender pay gap and wage index reports.

SALARY: Similar to PayScale, Salary.com offers comprehensive salary information that you can search by region, job title, level of experience, and more. You can also utilize its Cost of Living calculator, which is helpful if you are considering relocation for a new job.

SALARY EXPERT: If you are looking for an international or more global outlook, Salary Expert may be the best tool for you. With this tool, you can create reports based on your parameters, and you can research the cost of living around the world.

DISSECT YOUR CURRENT COMPENSATION PACKAGE

When changing jobs, most people want to see an increase in wages. It’s typical to aim for a 5-20% increase with every job change. By keeping this range in mind, you have some room for negotiations with the hiring company.

This 5-20% percentage increase reflects economic inflation and the new skills you have gained since the last time you accepted a new position.

FOR EXAMPLE: 3 years go, Jessica was hired as a Marketing Manager with a salary of $56,000 per year. Now, she is interviewing for a Marketing Manager role with a larger agency. Jessica has marketing certifications that she didn’t have three years ago. For these reasons, she could reasonably ask for $2,000-8.000 more per year, or a $58,000 to 64,000 salary range.

The increase you choose to ask for will depend on factors such as location, company size, the amount of time passed since your last job offer, and the new skills you bring.

Other factors to consider:

  • How much paid vacation time do you currently have?

  • What are the inclusions of your benefits package?

  • Do you currently have stock options?

  • Are you offered flex time and other non-financial perks?


Every part of your compensation package has a financial value. For this reason, you must understand what your overall compensation package includes. Point by point, you will discover what an increase would look like for you when it comes time to negotiating a job offer.

TURN THE QUESTION INTO A DISCUSSION

You are empowered to answer the toughest money-based interview questions once you have:

  • Done your homework

  • Researched your worth

  • Gained an understanding of the market in your industry and region


If you are comfortable doing so, you can discuss your salary expectations by using your current earnings as a baseline.

If it makes you uncomfortable to use your current earnings as a baseline, choose to be straight up in your ask, and back it by research.

QUESTION: What are your salary expectations for this role?

CREATE A DISCUSSION: I am very interested in learning more about the details of this role and what an average day or week entails. From research, I understand that similar positions in the area pay a base salary in the range of $45,000 and $50,000 per year. With my skills, education, experience, and achievements, I would expect an offer in that range. I am also interested in discussing the overall compensation offering, such as benefits and vacation time. Could you share further details with me?

QUESTION: How would you like to be compensated?

CREATE A DISCUSSION: I am open to discussing the pay structure offered by your company. I have earned a base salary plus commission for the past five years, and I appreciate the security and earnings flexibility that comes with this pay structure. Could you share with me how your company structures pay for this position?

QUESTION: What are you earning in your current position?

CREATE A DISCUSSION: I am currently making $98,000 per year with two bonus opportunities based on company profits. I am looking for a compensation plan that is aligned with the role and provides an opportunity for growth. I look forward to discussing the details of this role so that we can determine a fair compensation plan.

Or:

My current compensation plan falls under my employers’ non-disclosure agreement. My requirements are flexible, but I believe that my skills, education, experience, and achievements make me a valuable candidate. I look forward to discussing the details of this role so that we can determine a fair compensation plan.

IN CONCLUSION

Remember, its important to know what type of compensation plan will make you happy now and over the next few years. Many companies offer slight raises every year, around 3-5%, so it's essential to consider if your 'ask' will keep you healthily compensated over the coming years.

When you are justifying your ask, be sure to lean on your skills and accomplishments. It's very compelling for a hiring company to hear accomplishment details vs. saying that you're worth every penny because that's the going range in the industry.

If you are providing the hiring company with hard numbers, offer a range so that you have room to negotiate.

Lastly, always respond with professionalism. If the company low-balls you, it can feel insulting, but you’re better to graciously counteroffer or simply decline and walk away.

For more insight and practice related to salary, check out our Salary question and answer set.