New Pay Equity and Salary History Bans for 2018

January 18, 2018

Adapt your organisation to this new challenge for recruiting

For many employers, a standard part of the recruiting process has been to attempt to determine how much a prospective job candidate currently earns before deciding on a salary offer. The most common way to find out has been to ask the candidate for his or her salary history—either in the form of proof before presenting an offer letter or as a simple question fielded during the interview process. Over the past two years, some U.S. states and localities have passed laws banning employers from inquiring about previous salary history.

What’s the idea behind banning employers from asking about salary history?

The intended goal of pay equity laws and salary history bans are the same: to ensure that women are not paid less than men for doing the same work. It is no secret that a gender wage gap exists, with women earning nearly 19% less than men, on average in the United States and about 17% less than men in the United Kingdom, according to OECD data.

The idea driving salary history bans is that if an employer can ask for candidate salary history, the company’s offers to female candidates will continue to be lower, thus perpetuating the wage gap. When employers are banned from asking, it is assumed wages for women will rise to match those of men.

Ironically, this logic may not bear out in reality. A study by PayScale published in Harvard Business Review revealed that when ‘a woman who was asked about her salary history and refused to disclose was actually offered 1.8% less than a woman who was asked and did disclose. Meanwhile, if a man refused to disclose when asked about salary history, he received an offer that was 1.2% higher than a man who did’.

Which states and localities have new salary history bans?

  • Massachusetts was the first U.S. state to ban employers from asking about salary, with a law that went into effect in 2016.
  • In 2017, Oregon enacted a statewide Equal Pay Act with salary history ban. California, New York, Delaware, and Puerto Rico also banned employers from requesting salary history.
  • New York City, Philadelphia, Pennsylvania, and San Francisco, California banned the practise for businesses operating within the cities.
  • Similar measures are being debated in state houses and city councils across the U.S.

What about the U.K.?

Although the U.K. has had the Fair Pay Act in place since 1970, a gender wage gap persists there, and businesses are under increased pressure to rectify it. Recently, the U.K. government has required businesses to submit information about their wage gaps to a government website and threatened sanctions for businesses that do not comply. As of December 29, 2017, only 5% of businesses had supplied the information.

Best practise: Stop asking about salary history in all locations

Whether your business is located in a jurisdiction that has passed pay equity laws or salary history bans, employers need to get ready for this type of legislation. It is likely that these laws will be enacted more widely in the future as more governments get serious about closing the gender wage gap.

Furthermore, if your business operates in multiple locations, you’ll still need to conduct fair, equitable recruiting and hiring practises across the entire organisation. The growing trend for remote employees also complicates an HR department’s compliance picture when it comes to salary history bans. For all of these reasons, the best practise going forward will probably be to eliminate salary history questions from your talent acquisition process.

Next steps for employers

You will need to revise your hiring practises to develop your candidate offers using different information than previous salary history. Instead, try to price the correct value for the job, rather than the individual. It is also still perfectly legal to ask candidates about their salary expectations. Review and revise interview transcripts and application materials to remove references to salary history.

Asure Software’s Talent Management solutions can help your organisation standardise acquisition programmes to ensure a consistent, compliant recruiting and hiring process.