The Movement Banning Salary Questions is Reshaping the Recruiting Process
As a growing number of jurisdictions ban questions about previous salary, what's a recruiter to do?
By Daniel Solo
It was Massachusetts that set the ball in motion, being the first state to originate the idea and pass the Pay Equity Act in 2016. Delaware was quick to follow and became the first to enact the law last December. Since then, eight major jurisdictions, including New York City and California, have followed suit. A slew of other states, including Rhode Island, Florida and Mississippi, are considering similar legislation. These new laws, which prohibit employers from inquiring about a candidate's salary history prior to making them a job offer, will have a substantial impact on how companies will be able to recruit moving forward.
For advocates, the primary goal of these new laws is to help eliminate the gender pay gap. It purports to do so by keeping low pay from following women from job to job. When a woman receives a lower salary than her male counterpart in her first job and it follows her to her second job, the discrepancy in salaries can fester over the course of her career.
If the obligation to reveal her previous salary is removed, she may be able to mitigate and even overcome the pay gap as she moves from job to job. As pay equity laws continue to sweep the nation, the gender wage gap -- which was 19.5 percent in 2016 -- could begin to narrow.
Some employers are taking things into their own hands in cities where legislatures are slow to catch on. On Wall Street, firms such as Citibank and Bank of America are taking steps to change their company application and policies in an effort to close the gender pay gap. Wells Fargo and Bank of New York Mellon also vowed to reform interview and pay rate policies. According to Forbes, this is the start of creating an equal playing field for women in finance, and hopefully across all industries.
The other thing the laws will obviously eliminate is the ability to ask any of the variations of the infamous question: "What was your most recent salary?" For recruiters, this can complicate the processes they conduct to present hiring managers with ideal candidates at the best possible value. Especially considering the war for talent in the finance industry, meeting -- and exceeding -- expectations regarding pay parity is vital.
Many employers who no longer ask applicants about salary now ask instead, "What is your salary expectation?" Then, they use the candidate's expectations to help determine their future rate of pay, while mitigating the wage gap. Merrick Rossein, professor at City University of New York School of Law, suggests a different tack. He says employers can use objective measures of the applicant's productivity to determine an appropriate pay level. For instance, an applicant for a commission-based job can be asked for their level of sales at a previous company.
Additionally, the level of the position determines how detrimental it is not to have salary history. Recruiters scouting for junior to midlevel talent have relied on previous salary information during their hiring process, while employers filling leadership positions focus more on qualifications and less on salary budget. However, candidates may still share their salaries with potential employers if they choose to do so.
HR officers and recruiters can also get ahead of the curve by anticipating the coming changes and altering their recruiting and hiring processes accordingly. Continuing to find and retain talent in this environment requires a complete overhaul of hiring tactics.
First, hiring managers, HR teams and recruiters should determine precisely what a position should pay based on its job description, the skills required and the pay range of the company. Then, they can define what the drivers would be behind giving a candidate a higher or lower compensation package.
Finally, they should be open and honest with the candidate about what the position pays. That transparency will help set them apart from the opacity of the competition and make for a more productive, effective interview process.
Even if the deluge of pay equity legislation slows, hiring practices cannot remain unchanged. Regions as diverse as New Orleans and Puerto Rico have made the question illegal. In places where the government has been slow to act, corporations are picking up the slack.
In 2015, Salesforce spent $3 million to ensure that the salaries of its employees were equal across genders. So, recruiting professionals can either change processes now, before the revolution has ended, or blinkingly adjust to it once it has already been decided, whoever the decider may be. Pat Wadors, Chief Talent Officer for LinkedIn, said it well: "It's going to come to us. We have to decide how we want to play in that space when it hits us."
Daniel Solo is the founder of Second Line Advisors and is an industry leading expert within the Risk, Regulatory and Compliance functions since 1999. He has conducted searches for executives in the compliance, risk, legal, internal audit and regulatory affairs functions throughout the world, particularly in financial services. His portfolio of work includes Chief Compliance Officers, Chief Risk Officers, Chief Auditors and Chief Legal Officers. He has been noted in various industry periodicals and is engaged in industry events with The Clearing House, SIFMA, ACAMS, RMA and GARP.