Asking about prior compensation helps manage candidates’ expectations.
A number of recent articles in the business and popular press have questioned why HR should ask job candidates for their salary histories. Many assign nefarious motives to employers, arguing that once a job seeker has disclosed his or her current earnings, the company will disregard market data, pay ranges, relevant education and experience in order to lowball an offer.
In reality, however, the reason employers request this information is to avoid wasting everyone’s time. HR must have a means of gauging how likely a candidate is to accept an offer the company is prepared to make.
Starting the process with accurate data is the best way to move toward a competitive and equitable salary that works well for both parties. The intention is not to lowball or cheat anyone, but rather to avoid unwelcome surprises. After all, the last thing most job seekers want is to engage in a protracted and sometimes arduous interview process only to realize at the very end that their salary expectations are not aligned with the pay range of the position.
Understanding upfront that an applicant’s current salary exceeds budget availability or the salaries of similar incumbents also saves time for the employer, enabling recruiters to focus their efforts on finding a better match.
Moreover, knowing a candidate’s compensation actually helps HR to negotiate the best deal for both employee and employer. Compensation professionals fully understand that candidates expect to increase their compensation when they apply to a new organization. But if we are left in the dark about an individual’s current or recent salary information, we have no way of knowing if the pay we offer them—based on relevant education, experience and the range assigned to the position—represents a boost or a dip for that applicant. In many cases, a slight adjustment made based on salary history could mean all the difference between whether a candidate takes the position or decides to keep looking.
Certainly, there is a case to be made for transparency on the company side as well. In my employer’s case, for example, pay bands are posted with each job description, and our recruiters verbally share this information with prospective candidates. We are a public-sector employer, so our salaries tend to lag the market and we generally hire at the pay-range midpoint or below.
Here, too, salary history is helpful in clarifying expectations. Many candidates will see the range and expect to be offered compensation near the top. Knowing the applicant’s current salary can help HR to manage this situation and explain the rationale for offering pay closer to the middle of the band.
Finally, from a hiring manager’s standpoint, salary history also provides valuable information about the candidate’s career progression. Steady rises in pay demonstrate increased responsibility over time and show that the applicant was successful in previous positions.
While there may be a small number of employers that misuse previous salary information to make inequitable deals, most employers rely on it to ensure that the hiring process is as efficient, transparent and cost-effective as possible for all parties involved.
Sylvia Francis, SHRM-SCP, is the total rewards manager for the Regional Transportation District in Denver and a member of SHRM’s HR Disciplines Special Expertise Panel.
Using salary history to set future pay hurts your profits and diversity efforts.
Negotiating based on salary history assumes that pay is a neutral scale that can be used to rate people. But compensation varies from industry to industry, region to region and employer to employer; it is hardly objective. And that’s not to mention known racial pay gaps as big as 50 percent and a gender pay gap of 22 percent.
One legitimate business purpose HR professionals will give for using salary history is to save time. Eliminating those who earn more or less than the budgeted salary can help to quickly cut a pool of 250 applicants down to a much more manageable five or 10. Unfortunately, however, what organizations save in time, they may be losing in diversity—which could wind up costing them far more in the long run.
While companies pay lip service to having diverse workplaces, very few have achieved this goal. Numerous studies have shown that diverse leadership teams create greater profits. Yet McKinsey research published in January states that only 3 percent of U.S. companies have senior leadership teams that reflect the gender and racial makeup of the country’s labor force.
When employers force people who have been underpaid in the past to disclose their previous salaries to help determine their next one, prior discrimination is perpetuated into future bias—which in turn inhibits career growth. And unfortunately, refusing to provide salary information is often not an option. Regardless, answering or not answering may lead to the same result for highly desirable diverse candidates: the languishing of their applications in resume databases.
Taking prior compensation out of the hiring equation is an idea that has been gaining traction. When I first proposed an end to salary history questions in 2012, I felt like I was alone and out on a limb. But just three years later, in 2015, Beth Cobert, interim director of the Office of Personnel Management, made headlines when she issued a memo suggesting that using salary history to set future pay is perpetuating the gender pay gap.
Moreover, two states—Massachusetts and California—have filed equal pay bills that include bans on asking about salary history. (Full disclosure: I was part of the team that wrote the proposed legislation for Massachusetts.) More states are expected to follow. The Massachusetts bill passed the Senate in January and is progressing to the House. Gov. Jerry Brown did not sign California’s bill into law mainly because he had approved another equal pay law (S.B. 358) a few days earlier. His veto comment included the statement “Let’s give S.B. 358 a chance to work before making further changes.”
In January, Linda Babcock, an economics professor at Carnegie Mellon University and author of Women Don’t Ask: Negotiation and the Gender Divide (Princeton University Press, September 2003), was quoted in a New York Times article about bridging the pay gap. “Don’t ask about salary history for new hires, and it really reduces the impact of previous discrimination,” she said. “I think that is the most effective thing organizations can do.”
It’s time to stop asking for salary histories. Eventually, it will be a common best practice and perhaps even the law. Why not get ahead of the curve?
Katie Donovan is the founder of Equal Pay Negotiations in Medford, Mass., which focuses on eliminating unintended biases in the hiring, promotion and review processes to achieve diversity and equal pay.