Does Banning Questions About Salary History Improve Pay Equity?

Posted by Jeff Pelliccio on Oct 3, 2017 9:00:00 AM

In ICS insights

One of the first rules of negotiation is to let the other person make the first offer. Lots of employers have rested their salary offers upon this rule by asking candidates how much they made at their previous or current job. They might use this past salary history as a basis for their own offers. In other cases, employers may simply want to screen prospects who would probably expect a higher salary than the company budget allows. Both job seekers and job providers may view questions about past salaries as a pretty normal part of the interviewing process.

Do Salary Histories Impact Pay Equity?

At first glance, the practice of asking prospects about their past pay doesn't appear to have much to do with pay equity. Job candidates and hiring managers may just assume that it's a typical negotiation and screening tactic. At the same time, Harvard Business Review reported that companies have been banned from asking prospects about their past salaries in Massachusetts. In addition, other states and cities have been mulling similar rules. If these kinds of questions seem routine, why might state or local governments suddenly make them illegal?

Legislatures have pondered this question because they hope to reduce the pay gap for women and possibly, minority groups. Proponents say that banning questions about salary history will keep traditionally lower salaries from following women around each time they switch jobs. Certainly, an employer can still ask a candidate how much she expects to make if she's hired for the new job; however, the employer cannot ask how much the candidate made at her current or previous job.

To study the question, Harvard Business Review reported on a recent survey of over 15,000 male and female job seekers. The survey did reveal some gender bias, but it wasn't overwhelming and actually didn't turn out the way that was expected.

In each case, the candidate was asked to reveal his or her salary history:

  • Men who refused to disclose their salary history received offers that were 1.2 percent higher than men who offered the information.
  • Women lost an average of 1.8 percent if they refused to tell the interviewer how much they made in the past when compared to those who disclosed it.

In other words, this survey's results skewed the wrong way to prove that hiding salary history helped women. It's possible to argue that it did reveal a gender bias because employers could have assumed that women earned less because they would not disprove it by revealing their past earnings. Of course, the difference between the salary offers in both cases were fairly small, so it's just as possible to argue that the survey really didn't reveal anything new. Again, this is just one survey, and it's possible that a larger survey would provide more insight.

How Should Employers Handle the Question of Salary History?

Harvard Business Review agreed that this survey didn't provide any definitive answers. At the same time, they didn't advise employers to focus on salary history. After all, salary offers should be based more upon positions and job descriptions than individual people.

If employers do need another way to determine salary expectations or screen job candidates, these are some suggestions:

  • Simply ask job candidates about their salary expectations.
  • Provide job prospects with a salary range as soon as possible.

Yes, offering a salary range might violate some golden rules of negotiations. On the other hand, that action also helps present the employer as a transparent and friendly place to work. Some candidates may self-screen themselves out because they expect to get paid more, but that's actually helpful. Revealing a salary range may also protect employers against claims of discrimination because the information lets candidates know that they will be offered a salary that is based upon the job and not upon the person's gender or other characteristics.  

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Does your company need a better basis for salary offers? We can offer you our 2017 salary survey for free. Just click the link to start your download. After that, contact us here at ICS to let us know how we can help you hire your next, best employee. We offer permanent, contract and temp staffing services at all levels.

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