Over the last two years, states and municipalities have been tripping over each other trying to see who can enact wage transparency legislation fast enough. The current tide of this legislation focuses on the so-called “salary history” question in job interviews, specifically, making any and all pre-hire inquiries about salary history unlawful. In other words, in many states, you can no longer ask an applicant, “What is your current salary?” This trend began in Massachusetts in mid-2016, and is steam-rolling its way across the country. There is even discussion about passing a federal ban against the salary history question, which would make it unlawful in all fifty states. As I look back on my Human Resources career, I am astonished at how things have changed so radically over the years. When I began in HR over thirty years ago, merely considering the notion of a ban on asking about salary history would have been unthinkable and scoffed at as folly.
Salary history bans present managers with a challenge. If we cannot ask about prior earnings in interviews as a starting point in determining a salary offer, what can we ask? How do we determine a salary offer? Perhaps it is not an issue of asking a question or a series of questions that would replace the salary history query. Rather, this new trend may require us to undergo a paradigm shift in our thinking about how we arrive at a salary offer. This article will explore this issue, and provide guidance on dealing with the salary history question ban.
History & Logic Behind the Salary History Ban
First, it is important to understand why the legislation has become so popular in such a relatively short period of time. One of the underlying causes is the political polarization of our society in the last decade, made all the more glaring by the recent Presidential election. We seem to have a national obsession with unlawful discrimination, including gender discrimination, which gets us to the wage gap problem between men and women. I am not taking a position pro or con on any of these issues. I am merely pointing out what I believe to be the catalyst behind the ban on the salary history question. And as a Human Resources professional, I have always been a champion of equal employment opportunity. This ban, however, takes the issue to a new level and requires a new way of recruiting.
Over the last year, the wage gap issue has become a recurring news item in all forms of the media. These include well-respected business periodicals that span both political sides, as well as popular and less well-known news outlets. It is generally accepted that the wage gap between males and females is 79 percent. That is, females earn.79 cents for every dollar that a male earns. A quick Google© search will yield a plethora of articles that cite this statistic. While we all acknowledge that there is indeed a wage gap, boiling it down to 79 percent may be an over-simplification. Some well-respected journalists say that this gap is “unadjusted.” When you factor in controls for occupation, job title, job description, education, industry, location, and years of service, this gap narrows significantly. The point is that while there is indeed a pay gap, the reasons and the solution are much more complex than many would have us believe. But, be that as it may, our legislators have concluded that this is an inequitable situation, one that needs to be remedied through legislative action. And they further believe that one factor that has led to the pay gap revolves around salary history.
Over the years, employers came to believe that the correct way of arriving at a starting salary was to pay a variable percentage higher than applicants’ most recent salary. For many of us, that seemed to make perfect sense. I was taught that you need to consider the following to arrive at an equitable salary offer:
1. A salary offer needs to be worthwhile to applicants. This generally equated to an increase of 10 to 15 percent above applicants’ current base salaries.
2. Determine if the 10 to 15 percent over current salary fits into your salary range. Salary ranges were established by first determining the midpoint of the range. Salary surveys would provide this information. The average salary for a given job would typically become your salary range mid-point. Then, the minimum salary was factored at 80 percent of the midpoint, while the maximum was factored at 120 percent. The goal of recruiters was to hire between the minimum and the midpoint. This would allow for growth over the years within the salary range. There were exceptions. For example, we would often go higher in the salary range if the applicant had more experience than your targeted applicant and was too valuable to turn away.
Occasionally, when asking the salary history question, we would get applicants who declined to answer. They typically responded by advising recruiters, “Tell me what the job pays and I’ll tell you whether or not that is in my range.” Or they might have answered the question with another question: “What is the salary range for this job?” That would make recruiters very uncomfortable. If we provided the salary range, most likely, applicants would make the leap that they should be paid at the top of the range. These applicants were often dismissed out of hand and removed from further consideration because they were deemed “uncooperative” or “difficult.”
However, the current experts on wage inequities between genders claim that this salary history method of arriving at a starting salary only perpetuates the wage gap. Their logic is based on the assumption that women are earning less than men to begin with. And sadly, they claim that most females are not aggressive enough to negotiate what they believe is an appropriate salary offer. They further rationalize, that once female applicants reveal their lower salary, recruiters would be able to “low-ball” them and get them to accept an offer that would be less than an offer for males with comparable experience. As an H.R. manager, this tells me that those same people who are equal employment opportunity advocates, really see the female members of our society as the weaker sex. This makes me angry. I can only imagine how it makes a professional female feel.
Arguing with the logic behind this thinking is futile, since, like it or not, we will all soon be faced with the fact that we can no longer ask the salary history question. Additionally, it is not my objective to be a proponent or an apologist for either side. The real issue here is how to deal with this new reality; the ban on salary history questions is here to stay. Now it is up to us to figure out how to deal with this. While there is an abundance of literature available that justifies this salary history question ban, there is a dearth of advice, guidance, and information on how to recruit with this ban in place.
Many recruiters, including yours truly, are going to have a difficult time not asking the salary history question. It has become a fundamental part of how we recruit. Some will resist operating within the new reality by asking questions designed to elicit the same information as the salary history question itself. For those of you who cannot make the shift to the new reality, you might consider the following questions:
• “Why are you leaving your current employer, and what are some of the things you would like to get in a new job?” Applicants may answer that they are leaving to increase their compensation, or may tell you that an increase in pay is a factor in their job search. This opens up the door to a deeper dive on the issue of salary. You still may not ask the salary history question, but this may give you a window into finding out what their salary expectations are.
• “What are your long-range goals?” This question may elicit salary goals.
• “What are your salary expectations for this job?” or “What are you looking to earn in your next job?” Of course, these are the most direct questions to get you the information you will need to start the salary offer process.
I must, however, issue a word of caution here. Some states, for example New York, have provisions written into their statutes that specifically prohibit employers from basing a starting salary on current salary, even when that information is volunteered or discovered through a third party.
If you believe that applicants need to provide you with a starting point for salary offer negotiations, you will look to these alternative questions as a replacement for the salary history question. However, I prefer to operate within the new reality.
Operating Within the New Reality
Those who favor the salary history ban legislation would very much like you to pay each applicant what they are worth, rather than base a salary offer on their previous salary. Easier said than done. Aside from the aforementioned paradigm shift in our way of negotiating salary offers, the ban on the salary history question will force organizations to focus on salary ranges, rather than a specific salary amount that they have in mind for a given job. Let’s face facts… salary history is now off the table. It would be prudent, then, to consider the following when a job vacancy materializes for which you need to recruit a replacement:
• There is no question but that operating in this new reality will require that you obtain market salary data from industry salary surveys. General salary data will not suffice. You will need surveys that are industry-specific, that are regional, and that have titles and job descriptions similar in nature to those positions you manage and for which you are recruiting.
• Salary survey data for the position for which you are recruiting, specifically, average salaries by geographic region, will help you to establish a salary range. The midpoint of the range can serve as your top offer, while 80 percent below the average can become your lowest offer.
• Consider the experience level of incumbents identified in the salary surveys and how that experience matches to the average salary. Once you have that information, you can match the years of experience of your applicants against the salary survey to arrive at an offer.
• In the absence of a salary survey (or perhaps in addition to it), you should also consider “internal equity,” meaning how the new starting salary will match up against the salaries of your current employees within the same job title. You should match the experience level of your applicant against that of your current employees, and use their salary levels as a gauge on a range for a salary offer. Thus, you would offer a salary to an applicant that is consistent with the experience level and salary of one or more of your current employees in that job title.
One of the downsides to operating without the salary history question is that the starting point for salary offer negotiation has flipped from the applicant to the employer. It does not really matter what applicants are currently earning (or what they made in previous jobs). The only thing that matters is the worth of the job. If you price the job properly, you will arrive at an equitable salary offer.
If you offer what applicants consider to be a salary that is below their expectation, they will at that point have no choice but to tell you how much above your offer they will accept as their minimum salary. Conversely, one of your fears is that you offer a salary that is well beyond their expectation. You may believe that if this happens, you will have offered too much. But consider that if your offer matches the data from salary surveys and is consistent with internal equity, your salary offer, while high, will indeed be equitable.
Changing long-established practices is never easy. This shift will take time. And no matter how much you disagree with the logic behind the salary history question ban, the fact is that you will need to get used to this new way of recruiting.