(For updates on which States and cities are impacted as at the time of reading this article, please visit this blog for the most up-to-date information: Salary history bans in 2021.)
Unequal pay between men and women exists: it’s been widely reported that women earn around 80% of what men earn.
One issue contributing to this is a lagging effect. Offers that are based on what salaries are currently being paid, which for women can be around 20% less than men, perpetuates the status quo. Numerous states, cities and counties in the US are trying to address this issue by enacting new laws and regulations to address what questions employers can ask around salary and salary history. By doing this, the hope is that people are offered salaries that accurately reflect their experience and skill set in their market.
This affects professional services firms because as laws have changed, and are still scheduled to change, this will affect the hiring practices within firms, written or otherwise. These new laws prohibit hiring practices which ask a potential candidate about their salary or salary history.
Firms would be prudent to take a stand on this issue early. First, to get ahead of compliance, and secondly, to impress potential candidates through their proactivity to be on the right side of these discussions.
We are having many conversations with firms on this topic to help ensure both compliance and best practice going forward.
Current status on law’s affecting the question of ‘how much did you make last year’
Some states, cities and counties have specifically banned questions on ‘how much did you make last year’. Here is a list in order of the date the bans or prohibitions were enacted:
Bans or prohibitions not affecting the private sector
Other states and cities have some form of salary history ban, but as of yet they do not affect employees in the private sector:
As an employer located in a banned state or city, what is prohibited
Some employers have argued that a candidate’s current salary is an indicator of their market worth. Other employers feel ill-informed without a current salary read because they use that salary as an indicator when offering a new salary for the role they’re recruiting for. But these new laws prohibit that exact practice, as it perpetuates the gender pay gap (and other discriminatory practices). Experienced HR professionals and search professionals will already know good salary ranges for the role they are recruiting for. If employers don’t know this, that’s an area where search professionals can show their value.
A salary is rarely an indicator of worth. Salaries are more often than not a reflection of the prior employer’s pay policies and attitudes relating to their employees. And employers can have outdated or behind-market salary ranges that they try to retroactively apply, particularly if they haven’t gone to market for some time. And, as we’re seeing, one effect of this is that it can disadvantage some women and other groups in the workforce.
On the candidate side, they are often reluctant to reveal their salaries. It is highly sensitive and personal information that – if they don’t have a rapport with the firm or recruiter they’re working with – they don’t yet know or trust what is to happen with that information. Whilst recruiters and HR professionals might be used to dealing with salary information on a daily basis, it shouldn’t be lost on them as to how candidates can feel about talking about salary generally.
Going forward, firms need to develop better and different strategies for finding the right candidates for the right roles, and in turn paying them the right package.
Firms can use interviewing techniques or specific-issue reference checking to test a candidate’s experience, skill set, knowledge and individual value. These methods don’t rely on salary and therefore don’t go up against these now prohibited questions on salary. High value search and recruiting partners differentiate themselves by using these techniques, and don’t rely on prior salary as a short-cut.
Firms should ask questions around salary expectation. Firms should know, either through their experienced HR professionals or their search and recruiting partners, whether those expectations are realistic. (If they’re not, that is a different conversation.) If a candidate’s salary expectation does not align with a salary range for a role at a firm, then that role the candidate and firm are discussing together is not going to be the right fit for both at that time. And that discussion is fine to have. But a firm can’t use salary history or data to formulate an offer.
A national firm would be wise to have only one policy across their firm which deals with their hiring policies to comply with the salary ban laws, as these new laws are simply the first of many. Savvy firms should draft a policy based on the strictest interpretation, and apply that across all offices to avoid a complicated state-by-state approach down the road. Taking a fair and modern approach will become a selling point for your firm. Your clients, your employees and your potential employees should know about this.
Where does your firm stand on this greater issue
These new laws go to the heart of a very important discussion in our society. This affects both women and men.
Your firm leadership should establish where they stand on this issue on principle, and beyond that which is currently required by law. Your clients, your employees, and potential employees, will all appreciate you being prudent and aligning yourself on the right side of the discussion.
Enjoy the discussions. We are in exciting times.
(NOTE: This article is not to be taken as legal advice. The author is not a practicing attorney, nor does the author purport to be. For any legal question or issue related to these topics in your state or city, you should seek advice from a practicing attorney.)
Kate Harry Shipham is the Principal of KHS People LLC, an executive search firm for BD and marketing people in professional services firms. Kate has done search and recruiting for 10 years and prior to that was an attorney. She loves what she does, and is always open to continuing the discussion: firstname.lastname@example.org