If You Need Salary History to Make an Offer, You are Doing it Wrong
As of last week, employers in New York City are no longer permitted to ask candidates for their salary history during the selection process. NYC joins other cities like Pittsburgh, New Orleans, and San Francisco and the states of Massachusettes, California, Delaware, and Oregon (and the territory of Puerto Rico) in banning this practice. The primary reason for these bans is to eliminate the gender wage gap. Women, on average, make about 80 cents for every dollar a man makes nationwide (check out this data by state and ethnicity from the Women’s Law Center).
Executives, HR leaders, the Chamber of Commerce, and many employment attorneys have raised concerns about these new laws. Their concerns are unnecessary. Here’s why:
Concern #1: Asking for this information helps employers better understand the current market. Without it, they won’t know what to pay.
This is total nonsense. Employers can buy salary surveys (many of which are industry and location specific), subscribe to services like Payscale or ERI to gain this information. If they truly are relying on candidates to drive their pay practices, they are doing it wrong.
Concern #2: Employers need a candidate’s current salary in order to set expectations during the hiring process.
The laws all allow employers to ask a candidate about their salary expectations, so if the expectations are out of line, they can address it in the same way they would if they knew actual salary.
Concern #3: These laws impact an employer’s ability to attract talent.
This honestly doesn’t make any sense. Candidates, especially women, will be more comfortable in an interview process that doesn’t scrutinize their salary history. People’s salaries could be above or below the current market for a variety of reasons (they worked in an industry that was booming or declining, they worked for the same employer for a long time and their salary didn’t keep up with the market because raises were capped, they moved jobs often and received increases each move that puts them above market, they are great/poor negotiators).
Concern #4: Employers are more vulnerable to lawsuits under these laws. Under most of these laws, candidates can voluntarily disclose their salary history. An executive at an HR consulting firm argues that if a candidate discloses a salary significantly below market and an employer pays them much lower than others in the same position, an employer could be sued for violating the law.
Seriously? Of course, they should be sued. Why would you pay someone significantly less than others for the same job?
This last concern highlights the main issue that is solved by these laws. Employees should be paid based on the value their position brings to the employer. What they made in their past jobs is not relevant to the value their role brings to the current/future employer. Hire smart compensation experts to evaluate the roles in the company and their relative impact. Set salary ranges based on value and market data and pay people accordingly. This really isn’t hard.