Why HR Should Forget About Candidates' Salary History for Good

Legislation is being enacted in some large U.S. cities that make it illegal for employers to ask candidates an unfair and dreaded question:"What's your current, or most recent, salary?" Job seekers in Philadelphia, New Orleans, Puerto Rico, anywhere in Massachusetts and—potentially very soon—New York City, will no longer have to stress about pricing themselves out of a job (or low-balling their worth).

NYC's legislation is pending, as it still needs to be signed into law by Mayor DeBlasio. Philadelphia's is currently on the books, although the the local Chamber of Commerce plans to sue the City, arguing that the law violates businesses' freedom of speech.

The Motivation Behind Wage Equity Laws

Wage equity is the original impetus for the law; the stated intention by its proponents is to end salary inequity between men and women. Since employers often benchmark the salary they offer based on candidates' most recent employment, and since women typically begin their careers at lower salaries than men, relying on salary history for new offers only perpetuates the gap.

While ending gender inequality is a laudable and necessary goal, it's not the only benefit for this type of legislation. I wrote last year about why HR should stop asking candidates about their salary histories, as the practice is inherently unfair to job candidates regardless of gender—not to mention unnecessary to business.

So, why are businesses vehemently fighting this?

Employment attorney Jason Habinsky notes that "some employers will see this [law] as depriving them of information which they could use to make good decisions," but those "good" decisions are based on the desire to manipulate future employees, a fact that few managers would admit to, but is undeniably true.

Do Wage Equity Laws Actually Harm Business?

In a word, no, wage equity laws don't actually harm business. Benchmarking an offer against salary history may save money in the short-term, but if frequent job hopping is the fastest way to achieve the salary employees know they're worth, retention rates will drop. It's simply a poor long-term strategy.

There should only be two factors that merit consideration when determining salary for a candidate. Managers have budgets for staff, and every manager knows the upper dollar limit available for each hire. That's the primary factor. After that, the value to the business of each candidate is the only other consideration. It's not a matter of getting top talent for as little as possible; what's important—and honest—is to offer the desired candidate a salary that fits within your budget, and represents his or her perceived value.

Whether or not wage equity laws actually ameliorate gender bias in recruitment, supporting them will likely prove to be good for the cities that enact them, and good for the companies that publicly support them. To build your employer brand around progressive and socially-aware policies is good for business; companies who publicly support initiatives to eliminate bias in hiring will be viewed as putting their employees' concerns ahead of their own.

HRs Role In Enacting Wage Equity Laws

As these laws spread across the United States, HR departments will need to review their hiring protocols. Job application and background check forms that ask for current or historical salary information will have to be scrapped. Third party vendors located in venues that haven't enacted the law will need to comply with their clients' local law. Additionally, global businesses with operations in venues with wage equity laws will need to get on board, or risk serious penalties.

But in my view, this is all for the greater good. Beginning a potential business relationship by playing a cat and mouse game where employers insist on knowing something that candidates do their utmost to avoid revealing is silly. HR can—and should—take the leadership position that ultimately serves both the company and the candidate equally well.

Photo: Creative Commons