In the past, questions regarding a candidate’s previous salary were a staple of every interview. Employers relied on it as a way of understanding the market rate for specific roles and gauging an applicant’s skill level. However, since 2016 state and local governments are increasingly adopting laws and regulations that prohibit employers from requesting salary history information from job applicants. Many bans extend beyond asking applicants themselves and also prohibit employers from reaching out to current or past employers or using publicly available information.
Here is a brief overview of the state of these laws and what employers can do to establish both fair and competitive compensation during their hiring process.
The Logic Behind the Ban
These laws are part of a nationwide effort to reduce pay inequity for women and minorities. The logic is straightforward. Past pay discrimination is perpetuated (either consciously or subconsciously) when employers make decisions based on applicants’ prior salaries.
Eliminating pay inequity is a must. But the patchwork of dozens of laws nationwide still poses a compliance challenge for employers.
Salary History Bans by State and Locality
Currently, there are 21 statewide (including D.C.) salary history bans in place, which prohibit employers from requesting salary history altogether, prohibit salary history inquiries before providing an offer, or prohibit the use of salary history to set pay. These include: Alabama, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington.
Twenty-one cities and counties, in addition to the US territory of Puerto Rico, have also passed legislation restricting certain types of employers from requesting salary history information from job candidates. These localities are in states both with and without statewide bans. They include: San Francisco (CA), Atlanta (GA), Chicago (IL), Louisville (KY), New Orleans (LA), Montgomery County (MD), Jackson (MS), Kansas City (MO), St. Louis (MO), New York City (NY), Albany County (NY), Suffolk County (NY), Westchester County (NY), Cincinnati (OH), Toledo (OH), Columbus (OH), Philadelphia (PA), Pittsburgh (PA), Columbia (SC), Richland County (SC), Salt Lake City (UT).
It’s important to also note that Wisconsin and Michigan have ended salary history bans for all employers except state departments. Local governments in those states may not regulate the information that employers can request or require during the hiring process.
While most state and local salary history bans share the same basic features, the devil is in the details. No two laws are the same, and employers operating in multiple jurisdictions should be incredibly careful and cognizant of these — often subtle — variations.
How Employers Can Navigate this New Landscape
One of the most difficult tasks facing any organization is attracting and retaining top talent. Compensation is key to this. So, how can hiring managers address compensation meaningfully, without relying on candidates to provide their salary history?
1.Inquire about salary expectations.
Asking salary expectations sounds like a reasonable work around. But the answer may not lead to accurate data on the true value of the position. Candidates are likely to have given this question a great deal of thought and will be strategic in their response.
Additionally, research suggests that men are more likely than women to feel comfortable when asking for more in negotiation settings. Studies also show that men initiate salary negotiations about four times more often than women — and when women do negotiate, they typically ask for and receive 30% less. This “confidence gap” predicts differences in what female applicants are likely to ask for when prompted with inquiries about salary expectations.
2. Be equipped with accurate salary ranges.
An employer’s best bet is to possess accurate market data on the compensation for the role they are seeking to fill. Accurate data must take into account the specific nuances of your company, geographic location, job responsibilities, and the experience and skills of the candidate under consideration.
So, the question is, where do you get that?
Some employers have turned to salary guides. But we’re here to tell you that they simply do not work.
The Misleading World of Salary Guides
Salary guides do not offer accurate information for a variety of reasons:
- Salary guides depend on surveys that are often conducted with HR Directors who inflate compensation data in order to make their firms look more attractive.
- Salary guides only offer generalizations through aggregated compensation data. They do not know your industry and they ignore the key driving factors in determining compensation in your sector.
- Salary guides are often skewed because the data from public and institutional companies are combined.
- Salar guides rely solely on job titles which are often ambiguous and misleading. Moreover, salary guides also do not fully capture the expanding scope of critical roles.
- Salary guides are often outdated by the time the survey is published.
20/20 Foresight – the Best Compensation Consulting Partner
As executive recruiters that specialize in real estate and financial services, 20/20 Foresight is uniquely positioned to provide accurate industry-specific compensation data.
We have direct contact with actual candidates occupying similar roles at similar companies, facilitated by our proprietary database comprised of 200,000+ profiles. Additionally, we have the ability to compile live compensation data by actively recruiting and interviewing candidates for the position under analysis. The result is accurate data on base, bonus, and long-term incentive compensation.
Because of the customized nature of our analysis, the compensation data is calibrated to the specifics of your company including its location, size, ownership structure, asset class, and investment strategy. Moreover, our assessment considers the candidate profile, taking into consideration years of experience, qualifications, market supply, and flight risk.
Traditional salary guides lack the ability to provide such customization, and other compensation consultants lack direct communication with real candidates.
Your Next Step
If you seek insights into contemporary compensation trends, require assistance in establishing compensation structures for specific roles, or would like to realign your entire leadership team’s compensation program, we invite you to reach out to us. Contact us at foresight@2020-4.com to discover how 20/20 Foresight can provide valuable support for your company.