Laws aimed at prohibiting employers from asking prospective job candidates about their salary history before making an offer are picking up steam in the United States. In response, some organizations are proactively implementing necessary changes and considering adopting nationwide policies. Others are not.
WorldatWork recently conducted a quick survey to understand the approaches U.S. organizations are taking to comply with new laws and the changing landscape. The "Quick Survey on Salary History Bans (U.S.)" found that there is nearly an even split between employers who prohibit asking candidates about their salary histories nationwide (37%) and those who prohibit only where laws are in place (35%).
Additionally, larger organizations (greater than 10,000 employees) are more likely to have implemented salary history bans across all locations, regardless of local laws. Currently seven states (California, Delaware, Louisiana, Massachusetts, New Jersey, New York and Oregon) plus a handful of cities have enacted some form of ban.
Much of the imperative behind salary history ban legislation is to foster pay equity and help close the gender and minority-pay gap.
"The intent is to not perpetuate any historical pay discrimination or inequity, and allow for the possibility of a correction," said Sue Holloway, CCP, CECP, director of executive compensation strategy at WorldatWork. "Presuming that organizations want to offer enough, but no more than necessary, to entice a candidate, individuals who may be worth more than their salary history suggests may find it difficult to negotiate higher pay. Removing historical salary data from the negotiation process is believed to help level the playing field."
A study by economists John Horton of New York University and Moshe Barach of Georgetown University in 2014 confirmed as much. During about a two-week period, half the employers in the experiment were no longer allowed to view the wage history of prospective employees like they had in the past. The other half could continue to operate with the knowledge of a prospective employee's wage history.
Compared with employers who had the wage information, those without it ended up interviewing and hiring employees who had made significantly less money in the past. When employers could no longer consult salary history, they expanded the pool of employees they considered and went to greater lengths to evaluate them.
While some research supports that a salary history ban would help achieve the goal of evaluating potential employees by more than their most recent paycheck, some pushback remains. Employers that had already implemented salary history bans were significantly more likely to report that it was very or extremely simple to implement (44%) compared to speculation from those who have yet to implement them (36%). This suggests it may actually be easier than anticipated to implement.
"It can slow down the hiring process. Without salary data it may take more time and be more challenging to make a competitive job offer that is acceptable to a candidate," Holloway said. "You hate to get to the end of a lengthy interview process only to have your offer turned down and find out you cannot pay the candidate what they want. Both parties walk away unhappy and frustrated."
This, however, can be overcome, Holloway said. Rather than wait until the end of the interview process to reveal a salary offer, employers can be more transparent, and share pay range data with candidates early in the hiring process.
Other key findings from the WorldatWork survey:
- 80% of hiring managers/recruiters said they generally rely on a job candidate's salary history in determining an acceptable offer.
- Three in four organizations do not prohibit using salary data to set pay for internal job candidates.
- Salary history is not heavily relied upon to assess a job candidate's qualifications and "fit" for a job opening. (67% of respondents said, "not at all" or "not very much," while 26% said "a moderate amount.")
- 60% of organizations who have yet to adopt a nationwide policy are unlikely to consider adopting one in the next 12 months.
The survey was conducted in February 2018 and had 838 responses from WorldatWork members within the United States.
Brett Christie is a staff writer at WorldatWork.