Stop Before You Ask for Salary Information

Determining the salary to offer a new hire is not an exact science. In fact, many companies operate without a formal compensation strategy for their business.

Many hiring managers rely upon an applicant’s pay history, to some degree, during salary negotiations. But in a growing number of states and municipalities, asking a job applicant about previous pay is now against the law.  

States like California, Massachusetts, Delaware and Oregon, and cities including New York and Philadelphia, have passed laws that restrict an employer’s ability to ask a potential hire about past compensation.

This type of legislation seeks to level the playing field, particularly for women and people of color. The assumption is that revealing one’s salary history during a job interview, especially if it’s below market value, may negatively influence (lower) the offer made by the employer. And if an applicant has been subjected to wage discrimination in the past, then vestiges of that discrimination will likely follow that person throughout his or her career.  

An example of wage discrimination

Here’s an example: Cindy applies for a job as an account executive. The company employs 10 account executives, an equal number of men and women, all working in the same office. They all have the same or substantially similar job duties and are paid $75,000 a year.

Cindy’s current employer is behind the times and routinely pays female account executives 20 percent less than their male colleagues, even if the job duties are the same, they all work in the same area, and their productivity is the same or even better. As a result, Cindy’s current salary is $60,000, and she readily discloses that number during her job interview.

Cindy aces the interview, and her work experience makes her a good fit for the job. Although the hiring manager thinks Cindy is a potential superstar and is prepared to pay her $75,000, Cindy is offered $65,000 in light of her salary disclosure, and she accepts. 

Some employers may think, “Why wouldn’t I offer a lower amount? Cindy’s an absolute steal at $65,000, and she’s getting a close to 10 percent pay increase. It’s a win-win for everyone. And where is the unlawful discrimination? Cindy’s lower salary offer had nothing to do with the fact she is a woman. The offer was driven by her last salary.”

Those in support of salary history bans would disagree, pointing to the likelihood that Cindy would have made $75,000 in her previous role if her employer paid female account executives fairly.  

Closing the gender pay gap

The heated debate over the need for laws that help close the gender pay gap will continue. In the meantime, salary history bans are beginning to gain a foothold and they will likely spread to more jurisdictions over time. Employers would be wise to take a few relatively simple preventative measures to avoid an unintentional violation of these laws:

  • Review job applications and delete any questions that request pay history.  
  • Inform hiring managers, in person and in writing (company memo or a revised policy), that they can no longer ask for this information during job interviews or at any point during the hiring process.  
  • Given that salary history bans remove a key data point, employers may want to consider acquiring compensation data from consulting companies or from the U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook. These resources can provide wage statistics for a variety of jobs and career paths.
  • Make sure all hiring managers in your organization are familiar with salary history bans in the cities and states where you operate. Each law imposes slightly different requirements on employers.  

At the end of the day, employers should always make it a priority to review their pay and all other workplace polices to ensure everyone is treated fairly and with the respect they deserve.