Sayonara, salary history?

While there’s no indication — yet — that a ban on asking job applicants what they currently make is headed to Wisconsin, the wage-leveling trend is growing in other states and major cities across the U.S.

“How much money do you make?”

In any other circumstance outside of a job interview, that question is a rude one. While commonplace in an interview setting, it’s still often softened to something a little less off-putting like, “What are you earning in your current position?”

New initiatives in cities and states around the country are seeking to put an end to that uncomfortable question with a ban on asking for an applicant’s salary history. It’s not a new concept — in October 2016 IB wrote about a federal proposal introduced in Congress that would prohibit employers from asking job applicants for their salary history before making a job or salary offer.

While that proposal remains stalled in a Congressional committee, more local efforts are underway across the U.S. to nix the salary history question altogether and create a more level playing ground for applicants seeking to improve their pay.

A ban on the interview question “What's your current salary?" has been in effect for about a week in New York, a move that will soon be followed by Massachusetts and San Francisco, CNBC reports. The salary-history law is already in effect in New Orleans, Oregon, and Puerto Rico.

The new law aims to shrink the pay gap between men and women by preventing the latter from being pigeonholed by a previous or current salary. Still, employers can find ways to skirt the law, for example, by asking what a candidate hopes to make in their next role.

Ashlie Johnson, an HR consultant and owner of Madison-based Brooke Human Resource Solutions, says that while she has not heard any discussion about the adoption of this legislation locally in Madison or Wisconsin, the intent of this type of legislation is to address the pay gap by ensuring that low pay doesn’t follow women, or racial minorities, from job to job and snowball over time. “However, it is so easily circumvented by slightly changing the language of the question, I find it doubtful that this effort alone will have the desired impact.”

That’s a sentiment echoed in IB’s report last year from Scott Paler, an attorney with the Litigation Practice Group and the Labor and Employment Practice Group chair for DeWitt Ross & Stevens, who noted lawmakers around the country had similar lofty aspirations regarding “ban the box” laws — laws precluding employers from inquiring about criminal history information early in the hiring process. “So far, early studies have suggested the ‘ban the box’ laws have not yielded the desired effect.”

The group that stands to benefit the most from this type of ban is prospective employees who are making a step upward in their career path, or those who may be moving from a market where the cost of living is lower than in their new home city, Johnson explains.

“I don’t believe that this ban truly provides more negotiating power than these candidates had before the ban was enacted, but the ban does now allow candidates to potentially inflate their desired salary without having to answer the question, ‘Why should you make so much more here than you did in your previous role?’”

It is important to note here that employers can still ask about how much an employee made in annual bonuses if they are in sales or other commissions-based sectors, adds Johnson. “Employers can also ask a candidate to disclose their previous salary after an offer is made. If they actually lie during in the interview process, they could then legally be fired. These types of sticky situations are easily avoided when employers have more transparency from the beginning of the process.”

Johnson also notes there could be unintended consequences of salary history bans becoming the norm.

“One that comes to mind for anyone working in an HR role — and recruiters specifically — is that this legislation could potentially force them into a lengthy recruiting process with a candidate who is already earning more than what the employer has budgeted for the position,” explains Johnson. “The most common reason for asking a candidate for their salary history is to quickly weed out those candidates who are ‘too far out of reach’ financially. This saves both the candidate and the recruiter from wasting one another’s time, and it also saves the employer the wasted effort expended by their recruiting team.”

Another unintended consequence that Johnson sees arising from this type of local legislation is the impact it has on larger organizations that may have locations in multiple cities or states. A salary history ban could force the larger employer to manage potentially inconsistent hiring practices, or change their entire practice to accommodate one local jurisdiction’s decision to implement this ban.

“There is also the cost employers will incur in order to be compliant,” Johnson says. “The ban goes beyond simply asking, or not asking, the question in an interview. Many employers today use complex online application systems to collect candidate data. The question of previous salary is often included in these online forms. In order to be compliant an employer will have to make changes to their HRIS/Applicant tracking systems, thus incurring costs for internal IT or external vendor services.

“There is also the cost to update training materials. While small companies may be more agile when it comes to updating their internal processes, larger corporations can spend thousands on updating training materials, as well as the time cost of re-training recruiters and managers to follow new internal processes.”

(Continued)

 

Why even ask?

It’s a valid question — why do employers even need to ask for a salary history? Why not just post a salary range for a position and be done with it?

It’s not quite so easy, notes Johnson.

“One reason employers want to know a candidate’s current salary is that they don’t want to offend a potential key hire by making a low offer,” Johnson says, “specifically in cases where an employer is trying to pull a quality candidate away from a competitor in a highly competitive market.”

Employers, like anyone in the position to negotiate, want to have all of the information possible to base offers on, notes Johnson. “Of course making good decisions in hiring from a budgetary standpoint is important — no one wants to leave money on the table when in these types of negotiations. However, I feel that there is a misunderstanding of the motives behind an employer’s desire to save money in this process. Oftentimes, especially in smaller or growing businesses, any money saved when hiring one candidate over another is invested right back into the organization in the form of salary increases for other employees, re-investment into benefits, or even adding additional staff.

Additionally, employers generally don’t include the salary range for a position when posting for a number of reasons, according to Johnson.

“When hiring for a certain title, there is often a large range of ‘going rates’ in the market. The amount that an employer can pay can be based on a myriad of factors — actual job duties, team size, the employer’s financial standing, nonprofit status, etc. It is common for employers who may not be able to pay as high a base salary to offer other perks such as better benefits, flexibility in scheduling, work-life balance, and culture. Posting only the lower base rate on a simple job listing may scare away potentially qualified candidates because it doesn’t paint a complete picture. Recruiters want the opportunity to have the conversation and sell the candidate on why their business is the candidate’s best choice.”

Requiring employer disclosure of a position’s wage range could be considered a missing piece of this puzzle, notes Johnson, but keep in mind, much in the same way that the salary history question can be asked using different language, posted salary ranges can also be manipulated to meet an employer’s needs.

“I don’t believe that this ban alone can work effectively to close the wage gap,” Johnson states. “Employers can still ask candidates about their ‘salary expectations,’ or the amount of money they would like to make in their new role. However, I do feel that many employers are taking strides internally to use market research, as well as budgetary factors, to create internal ranges for roles that more accurately put a price on the job, regardless of who fills it.

“It is doubtful that most employers will get to the point where these ranges can be eliminated completely, as there are so many other factors, such as experience, technical skills, and education that are taken into account when determining what salary will be offered.

Providing an answer

Johnson says for states and cities like Wisconsin or Madison, where no salary history ban is in place, there are some simple rules applicants can follow when responding to the salary history question.

Applicants should always take time to do their own research when applying for a position, says Johnson. If possible, the candidate should try to find out what rate is typical for the job, and understand the culture of the business they are looking to join.

“Candidates should also carefully consider the actual responsibilities of the position and adjust their expectations accordingly,” Johnson notes. “The salary for two manager roles, one in a small company with only two direct reports vs. one with 20 team members and a higher level of responsibility should have different wages.

“If a candidate is hesitant to reveal his or her current salary to a potential employer, they should indicate that they are ‘open to negotiation’ on their application or during the initial call with a recruiter, adds Johnson. “This then opens the door for the employee to take advantage of any research they’ve done, and engage in a discussion with the recruiter about market rates, other benefits offered, and what the candidate is looking for in their new role.”

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