Benefits & Comp 6 min

Understanding the Salary History Ban: Its Benefits and Limitations

March 27, 2019

In an effort to end the cycle of pay disparity, multiple states and municipalities are considering or have already passed laws about salary history questions in job interviews. As of February 2019, 13 states and 11 cities and towns have enacted some sort of ban making it illegal to ask what an applicant currently earns or earned at a past job (you can view an updated list here). But while the benefits of avoiding a salary history discussion may seem clear-cut, there are plenty of unanswered questions that remain.

First, why is salary history such a hot topic? And if pay disparity is the concern, can a ban on asking an interview question address it? Or are laws like these merely symbolic, with the only tangible benefit a less-awkward exchange between applicants and employers? Finally, if you’re recruiting in an area that has banned these kinds of questions, how can you be sure you’re compliant while still doing a good job of recruiting?

Why Is Salary History So Important?

If salaries were fixed by title and experience, prospective employers would know what candidates were earning and candidates would know what every job paid up front. But salaries don’t follow a set rate. They’re negotiable, which adds a theatrical—not to mention confrontational—element to the hiring process.

So, if you’re wondering why salary history matters, consider the conflicting motivations of employers and candidates. Candidates want to secure the highest possible salary they can, but employers don’t want to pay anyone more than they have to in order to fill an open position. The traditional employer approach is to offer an equal or slightly higher salary than what a candidate is currently earning—and that information usually comes from the candidate. Knowing this, some candidates lie about their past earnings in an effort to secure a higher salary. And some organizations have even gone so far as to require applicants to submit tax documents as proof that they’re being honest about their income. As tense situations go, it’s one of the worst.

What’s the Problem with the Salary History Question?

Again, none of this would be an issue if salaries were standardized or equal pay were the norm. But in a society where women and minorities have historically been paid less for doing the same job as their white, male counterparts, salary histories reflect that disparity and invite the opportunity to let unequal pay perpetuate. By banning the question, the hope is that employers will be more likely to base offers on what the job should pay, not on what the candidate has earned in the past.

The Unexpected Impact of Candidate Responses

Perhaps as important is the theory that the salary history question creates a problematic situation for candidates due to how employers perceive their responses. When asked to reveal their past earnings, candidates have a choice: refuse or comply. And it seems obvious that employers might raise or lower their offer based on how they feel about a candidate’s behavior. But recent research suggests that employers’ views change depending on the gender of the candidate, meaning the same answer can have an opposite effect on an offer when it comes from a man instead of a woman.

In a 2018 Payscale survey, women and men were asked about their experiences with employers inquiring about salary history and the resulting offers they received (if any) from those companies. The results were surprising: On average, women who refused to answer the question received lower offers than those who provided their pay history, while men who refused received higher offers compared to men who spilled the salary beans. So, simply by asking the question, employers are setting themselves up for discrimination, while candidates are forced to play to gender stereotypes if they want to come out ahead.

It’s also interesting to note that for women, there’s no correct answer for salary history questions. If they reveal their statistically lower salaries, they are helping to perpetuate the gender pay gap; the bans on salary history questions are an attempt to stop this from happening. But by asserting their right not to answer, women may receive even lower offers due to being seen as “difficult” and therefore less desirable as employees. It’s a double-edged sword and a clear indication that society still has plenty of ground to cover in the journey towards gender equality. So, does removing salary history questions from the equation actually solve anything?


Check out our webinar: Creating Pay Transparency in the Workplace

What Does Banning Salary History Questions Solve?

The rationale behind banning salary history inquiries is simple: by taking away the question, it becomes harder for employers to base their offer on prior earnings. At the very least, it eliminates the awkwardness of refusing to answer, which has been shown to work against female candidates. These are good things.

But banning the question doesn’t stop employers from offering women and minorities less money. It doesn’t do anything to protect employees looking for a raise or seeking to be hired for a new position within their own companies; their salaries are already known. And it doesn’t help historically underpaid candidates and new job seekers accurately estimate what they’re really worth in the job market.

Finally, banning the salary history question doesn’t do away with a bigger issue: negotiation. It’s a skill that is rarely taught, isn’t necessary for many jobs, and that, according to the Payscale survey, seems to be perpetuating the gender pay gap, if you consider withholding pay information a negotiation tactic (which it is). Banning salary history questions may be a gesture in the right direction, but as long as negotiation remains common, the odds are still very much in favor of employers and continuing pay inequity for women and minorities.

Best Practices: Staying Compliant Under a Salary History Ban

Let’s assume that your organization is in favor of fair and equal pay for candidates with similar experience, while also acknowledging that it’s in your organization’s interest to keep its overhead as low as possible. Knowing that simply avoiding salary history questions isn’t enough, how should you conduct interviews and how do you extend an offer without a candidate’s salary history?

The first answer is to train your people. Conduct anti-gender-bias training for all hiring managers, male and female, and as an extra precaution, leave salary negotiations out of interviews entirely. You can’t stop a candidate from volunteering their current salary or proposing one, but you can make sure your application processes are clean of any salary history questions and get all hiring managers on the same page with what to say if the subject does come up. Something along the lines of salary being a separate discussion and one that will be handled outside of the interview process.

The second answer—how to extend an offer—comes down to clear communication and thorough research. Studying the local market should give you a decent estimate of the average salary range for specific jobs in your geographic location. Use experience and other competency factors to place favorable candidates within that range. Consider how to talk about the ways your organization compensates employees outside of a paycheck. And try to avoid all negotiations until after the decision to extend an offer has been made.

You may end up overpaying one or two candidates as a result, and you may lose one or two who feel they are worth more than you can offer. But in the end, being on par with current market rates is a good look for your employer brand and will create stronger bonds with the people you end up hiring, because they’ll know you’re paying them fairly.

 

In Conclusion

The real solution would be to more fully legislate and enforce fair and equal pay instead of banning one question and leaving so many other avenues open for pay disparity to continue. But that kind of heavy regulation over the job market isn’t likely to happen for a number of reasons that would take another article to explain.

So, in the absence of effective legislation, we must appeal to employers’ senses of right and wrong. Simply put, it’s right to pay people fairly for the work that they do, and it’s right to pay equally qualified candidates the same amount for performing the same job, no matter their gender, race, or any other immutable factor. If every organization embraced this as truth, people wouldn’t fear the interview process and there would be no need for a ban on salary history questions. But until that time comes, it’s up to us to set the example and show that putting people first is the best business decision a company can make.

Rob de Luca
Senior Copywriter

Rob de Luca is the senior copywriter for BambooHR. He believes HR professionals and others deserve information-rich content that enables them to do great work, and he has written extensively on the topics of HR leadership and best practices.