As seen in ERE Media, January 8, 2018.
Alert — New Salary History Expectations Require Changes in Your Hiring Process
Typically there are a few reasons for recruiters or hiring managers to pay much attention to compensation laws. However, that disinterested approach must now change because of new salary history laws in California, Massachusetts, Oregon, and Delaware (and I predict that it will soon come to most other states).
For example, under the new strictest of all requirements in California, when asked by an applicant, employers must now divulge the actual salary scale for their job. And employers, third-party recruiters, and reference checkers are forbidden from making any inquiries regarding an applicant’s current pay or salary or benefits history. And when it is volunteered or discovered, an applicant salary history cannot be used to determine their salary as a new hire. Well for most recruiters, this change is highly problematic because many for years have routinely asked applicants for their salary history for a variety of reasons. So if you want to improve your hiring and avoid legal issues, here are some actionable salary history tips for recruiters and hiring managers.
How to Hire Differently Under Salary History Laws
Because every state and city law is different, consult corporate legal counsel before taking action. However, here are the top 10 actions that I recommend that you consider.
- Don’t waste recruiting time on a candidate you can’t afford — you can’t inquire about salary history, but nothing in the laws seems to prohibit directly asking a candidate “What is your salary target for this job?” If your goal is to find out if you can afford them, simply asking a candidate their minimum salary/benefits expectation can help you meet that goal.
- Don’t waste the time of high-salary-expectation candidates— in California, if asked, you have to respond with the job’s salary scale or range. But if you want to alert candidates who have unreasonably high salary expectations, why not just proactively provide that salary-range information to them prior to scheduling an interview? They can then self-select out.
- Discourage applications from those you can’t afford — if your goal is to discourage even an application from individuals who you can’t afford, you can place the salary range in job announcements or job descriptions. Obviously, that may create an opportunity for salary comparisons between companies. But much of that information is already readily available for potential applicants on online employer review sites like Glassdoor.
- Stop salary negotiations— one option (adopted by Reddit) is to let applicants and candidates know upfront that once a salary offer is made, you don’t allow any salary negotiations. Or, alternatively, let them know that pay outside of that range is not negotiable, at least based on their past salary history.
- Educate applicants/candidates about their rights — make applicants and candidates aware of the relevant law and tell the candidates that they need not discuss their salary history any time during the recruiting process. In California, make them aware that they have the right to know the salary range for the job.
- Make sure that everyone in recruiting knows your salary ranges— because it must be provided when asked in California, make sure that every manager and recruiter is aware of the salary range for each job that they are recruiting.
- Get on the gender pay equity bandwagon with fixed salary formulas— the era of using past salary history to set current salary is over as more state legislatures determine that using salary history negatively impacts the pay of women. So corporate leaders should also consider dropping the idea of using salary history as a relevant data point. And instead, institute an objective, independent salary setting process that takes salary negotiations away from managers. The goal should be to make it a transparent process that uses a 100 percent objective fixed salary formula approach that only considers capabilities, accomplishments, and peer and industry pay rates. And ensure that salary determinations exclude previous pay levels or other factors that may negatively impact the pay of women new-hires.
- Drop mandatory salary history requirements for completing an application— if you use them, you will need to change job board online applications (and your own website) that require submitting salary history information before you can complete an application. Either drop the requirement for salary history information or stop using the job board altogether.
- Avoid legal and publicity issues by educating recruiters and hiring managers— old habits are hard to break. So when salary histories are not to be used, ensure that everyone involved in the hiring process knows the new expectations. Make sure that no one in the recruiting process prompts or actively encourages candidates to divulge their salary history or that no one involved in the process acquires salary history during reference checking or through firms like Equifax. The California law eventually allows the damaged parties to collect double the actual economic damages.
- Recruiting processes and pay equity must be monitored — implement monitoring components in the recruiting process to ensure that no salary history related anomalies occur during day-to-day recruiting. Video recording interviews, interviewing a sample of candidates, and using “mystery shopper applicants” are three possible monitoring approaches. Also, understand that your firm needs to monitor overall gender pay differences because everyone is watching. So periodically check the salary differential between men and women of both new-hires and existing employees.
Firms should attempt to increase gender pay equity not only because it benefits society but also because it can improve the performance and the retention of women at individual firms. Improving the percentage of pay that is based on quantified performance can also help in these two areas. Some firms have also found that shifting away from hiring and pay criteria that are based on low predictive factors like education and previous job titles actually result in the improvement of diversity and on the job performance of new hires. If you hire in California, that there are new laws covering “banning the box” for those with criminal records and new marijuana laws that will also affect employers.
Author’s Note: If this article stimulated your thinking and provided you with actionable tips, please take a minute to follow me on LinkedIn.