Is it Time to Stop Requesting Salary History from Job Candidates?
Updated: Jul 30, 2020
Is it time for employers to stop requesting salary history from job candidates during the interview process? It’s certainly a topic of concern – and potential caution – for those engaged in the hiring process.
Frequently asked questions during the recruiting and interviewing processes include, “What is your current salary?” and, “How much did you make in your previous job?”
Questions like these aimed at determining an applicant’s past or current compensation may be on their way out, as a number of jurisdictions have passed laws banning employers from asking about salary history.
Escaping the Below-Market Salary Cycle
The reasoning behind preventing employers from requesting information on pay history is that often an offer is partially based upon an applicant’s current or past pay.
If a job candidate discloses receiving below-market compensation at their previous job, they may also receive and then accept a below-market offer from a prospective employer, and this becomes a cycle that is difficult to escape.
It is likely that the cycle of lower pay affects women and minorities more than other groups, so the thought is that eliminating questions on past compensation may help reduce the pay gap for these groups as well.
Women are more likely to leave and reenter the workforce than men, leading to career breaks and lower long-term career earnings. According to the most recent available Census data, women earned 81.6¢ for every $1 earned by men during 2018, so the pay gap is a significant ongoing issue.
States with Pay History Laws
In addition to a few large cities that have already passed local ordinances and states that are considering enacting rules, the following states currently have laws addressing pay history:
The information above collected in part from an article on HRDIVE.com.
While nearly half the country’s states have laws and ordinances against requesting salary history, some states have gone the opposite way and passed laws that prevent bans on requesting salary history.
For example, Wisconsin passed a rule stating that “no city, village, town, or county may enact or enforce an ordinance prohibiting an employer from soliciting information regarding the salary history of prospective employees.”
It would seem that Wisconsin is trying to avoid the patchwork of local laws that have popped up in other states, where laws regarding questions related to salary history may vary by county or even city. It is possible that Wisconsin may eventually pass statewide legislation that would prevent employers from asking about pay.
Creating a Well-Defined Base Pay System
One of the reasons that companies like to ask applicants about their salary history is that they want to understand what a person is expecting to be paid. Setting and understanding expectations upfront allows them to prevent wasting time on the interview process if salary expectations do not align with the range for the position.
However, companies can share the salary range for the open position and determine if the candidate is still interested in moving forward without asking about salary history.
A well-designed base pay system links new hire pay to factors such as the external market, candidate experience and qualifications, and internal pay equity. Setting new hire pay on these factors rather than pay history can lead to greater satisfaction with the pay system and mitigate future internal pay equity concerns.
Strategies and Considerations for Companies Going Forward
1. Companies could consider changing their policies to prohibit inquiring about pay history, even if no laws have yet been passed in their jurisdiction.
2. If salary offers are based upon experience, market-based rates of pay, or other permissible factors rather than an individual’s past earnings, the pay gap may be reduced.
3. Using competitive pay data to determine an appropriate range of pay, rather than relying on a candidate’s pay history, may also assist in creating internal equity.
4. Not using pay history as a factor in making offers may reduce the chances of litigation related to pay practices that may discriminate against protected employee classes.
Dan Steele and Joe Kager of the POE Group.
- Joe Kager, Managing Consultant at The POE Group. Joe is a Certified Compensation Professional with over twenty-five years of experience in compensation and human resources. Connect with Joe on LinkedIn, call at 813-661-3111, or email him directly at email@example.com.
- Dan Steele, Compensation Consultant at The POE Group. Dan is a Consultant with the Poe Group, with responsibilities for project management and client relations. He has over ten years of experience in compensation and benefits management, with an emphasis on executive compensation, equity compensation plan design, and retirement plan design. Connect with Dan on LinkedIn, call at 608-577-9537, or email him directly at firstname.lastname@example.org.
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