Compensation, FLSA/Wages, Hiring & Recruiting

Asking Salary History May Soon Be a Thing of the Past

Does your organization routinely ask applicant salary history during the recruiting process? If so, you’ll want to pay close attention to some upcoming legislation that could change all of that. There’s a proposed bill coming before Congress that would make asking salary history illegal.

The primary goal of this bill is to take concrete action toward reducing or eliminating the gender- and race-based pay gaps that still exist. The theory is that when employers base a salary in part on the applicant’s previous salary, that action serves to reinforce any discrepancy that already existed. The result is unintentional pay discrimination.

If you’re operating out of Massachusetts, you may already be familiar with this idea, as Massachusetts has already taken the first legislative step toward disallowing employers from asking salary history during the interview process. Their state law has passed and is scheduled to go into effect in mid-2018. California and New York have similar legislation pending.

Why Might Employers Consider Dropping the Salary History Question?

Given this context, with one state already taking action and a proposed bill at the federal level, some employers may want to consider what they should do with their own policies. There are quite a few reasons to consider nixing the salary history question altogether. Here are a few:

  • Basing pay offers on salary history can lead to unintentionally discriminatory pay practices in which there is a disparate impact on disadvantaged groups, such as women or minorities. This could lead to potential discrimination claims.
  • Using the job requirements and preestablished pay levels within the organization makes it simpler to fit any new hire into the existing organizational hierarchy without discrepancies.
  • Pay history is not actually relevant to the applicant’s ability to do the job at hand. Nor is it relevant to how much the job is worth within an organization. It has historically been used as a proxy for the value someone brings from their past experience, but this does not take into account the fact that the individual may have been significantly underpaid in the past. A lower salary history has previously been used as a means of justification for paying someone less than originally intended. It’s easy to see how this resulted in unfair pay practices and how it results in different people being paid different amounts for the same job.
  • Most applicants who are switching jobs are doing so at least in part because they want to be paid more. Some are significantly underpaid at their current role. If the new job is based off of the salary of the old, this does little to show the new hire their value to the organization.
  • There are other (better) ways to determine market salary for similar positions. Some organizations ask salary history as a means to see what the competition is paying—and that’s a fair question to want answered—but there are better ways to get that information that do not result in possible bias or unfair treatment against a particular applicant.
  • Salary history has often been used as a disqualifier for a job, which results in situations where both the potential employee and employer may miss out. For example, if an organization disqualifies an applicant based on too low of a salary (assuming that individual does not have the requisite skills based on past salary alone), the organization could be missing out on someone who has simply worked in underpaid roles in the past. Alternatively, if an applicant is dismissed based on too high of a past salary, the organization could be missing out on an applicant who could be a great candidate and may be willing to work for a lower base rate if other factors are favorable.

Does your organization routinely request applicants to disclose their salary history before making a job offer? Does the salary history affect the salary offered to the applicant? Will you be switching this practice in light of the pending legislation?