Employers Unsure of Salary-History Bans
As more local governments enact laws barring companies from asking job applicants about their salary history, employers ponder how to respond.
By Michael J. O'Brien
When it comes to achieving pay equity in the workplace, employers apparently aren't sold on the idea that banning salary-history questions from the interview process will be effective in achieving that goal.
A new survey by the Hay Group division of Korn Ferry shows that 65 percent of executives at 108 companies believe their organizations will be affected by new legislation aimed at closing pay gaps for women and other underserved populations. However, the majority of executives polled (65 percent) believe that the law will not, or only to a small extent, actually improve the gender pay equity situation in their organization.
What is clear is that hundreds of thousands of employers will need to modify their talent screening and hiring processes, according to Korn Ferry.
"Organizations have a great deal to gain by implementing a strategy and process aimed at improving the overall fairness and transparency of their reward and talent management programs," says Bob Wesselkamper, global head of rewards and benefits solutions, Korn Ferry Hay Group. "This can help organizations create an employee value proposition that positions the company as a place where everyone can build careers and thrive."
In addition, hiring situations must be handled carefully as companies that violate the new rules can face substantial fines, the consultancy notes:
"As a result of this legislation, many employers will need to seek out better market data and conduct more rigorous analyses to determine what a job should pay versus relying on the crutch of a candidate's compensation history," says Tom McMullen, senior client partner in Korn Ferry Hay Group's Reward and Benefits group. "Organizations need to ensure they have an effective job evaluation process that provides the right criteria and credibility for assessing the size of jobs."
Jonathan Segal, an employment lawyer based in Philadelphia, told the Los Angeles Times the bans could be particularly relevant for older workers. Someone who's been working for more years and may be looking to scale back to a less demanding job -- or workers eager to get back into the workforce after being out of a job and willing to work for less -- could be subject to implicit bias when asked about their past pay, he said.
"Eliminating the question may help not only eliminate the pay gap for women," he said, "but may help older employees who are being excluded because employers think they wont be happy working for less."
Meanwhile, Korn Ferry says further action on pay equity is likely ahead, but few companies believe they're ready. Only 19 percent of organizations say they are well prepared to handle the new laws once they go into effect. Many large organizations indicate that they're likely to get ahead of the issue by changing their national policies instead of waiting for individual cities and states to pass measures. Nearly half of the executives polled (46 percent) said choosing to comply with the most stringent legislation is the likely mode of adapting to the new legislation, as opposed to complying to each local legislation.
"It's a new game out there," said McMullen. "Few large organizations will be exempt. It's better to be prepared than to be caught by surprise on this."