Ask a recruiter: Compensation Requirements

The question is inevitable; but how and when you answer can easily make or break your next job offer, so what's a savvy job-seeker to do?

It depends on the situation...

• Are you speaking with your recruiter?  Be frank.  (S)he needs to know what you made last year, what you made your best year, what you expect to make this year and how you expect to make it.  A W-2 may be required at some point in the hiring process, so be completely honest. 
• Is this your first interview with the company?  If you are working with a third party recruiter, the HR team should (a) already have your compensation information and (b) have provided your recruiter with a suitable range that (s)he in turn should have shared with you--or at the very least, confirmed that your requirements are compatible with--before submitting your information to the hiring authority.  Therefore, the best way to avoid capping your potential offer or getting yourself kicked out of the process altogether is to answer that you are familiar with the range and that you are comfortable with it.  
• Is this your final interview with the company?  Is the hiring manager trying to close the deal?  If the question is delivered in the context of anything along the lines of "so, what would it take to get you on my team," take a deep breath before you answer; they probably like you and you are probably being considered for an offer, but this is in NO WAY a blank check.  If pressed to provide a direct answer, be honest but understand that it is not your next employer's responsibility to subsidize the 30K commission you just decided to walk away from, signing bonuses are rare these days and non-recoverable draws are virtually non-existent.  Be fair to yourself but be reasonable; keep in mind that the majority of job changes only result in a marginal base salary increase and if you are asking for more than what seems reasonable, you had better have a good reason to do so and you had better be comfortable talking about it...  Does the new job involve a move?  More travel?  Are you losing benefits?  Gaining responsibilities?
• Are you currently underpaid?  While it may seem reasonable to expect a single job change to bring you up to market value, that may or may not happen.  On the one hand, the company should be fair and offer you what you're technically worth, regardless of what you made at your last company.  On the other hand, most employers are not going to jump at the opportunity to subsidize a major standard of living adjustment just because it would appear that you failed to advocate for yourself the last time you got an offer.  Do you suspect that they aren't going to make you an offer that's commensurate with where you would like to be?  Keep growth opportunities in mind--how soon would you be eligible for a performance-based increase?  Are there any bonus opportunities?  Finally, if you are underpaid, how did you get that way?  Were you hired to do one job and slowly transitioned into another without an appropriate change in compensation?  Had you been out of work for 18 months when you took the offer?

*If compensation is the most compelling reason you have to leave your current organization; stay where you are.  Address the issue with your current employer.  Demonstrate your value and make sure your boss is aware of your contributions.  Taking a new job because the old one didn't pay enough rarely results in what you're looking even if what you thought was your most important requirement is satisfied--if something looks too good to be true, often it is.  And never use a hiring process as a bargaining chip; accepting a counteroffer is the surest way to put yourself on the chopping block.  Companies want employees who genuinely want to be there--not employees who just want to work for the highest bidder.