Should HR be Concerned about Candidates’ Salary History?

Should HR be Concerned about Candidates’ Salary History?

Questions about education, references, and job history commonly arise during the job interview process. However, the question of salary history is almost always an uncomfortable one for both candidates and interviewers. A lot of companies don’t bother to ask candidates for their salary history or inquire about their salary preferences when they apply for a position. According to a WorldatWork survey of over 800 compensation and benefits professionals, over 40 percent of employers have implemented policies that prohibit recruiters and managers from asking about a prospective employee’s salary history. Generally speaking, the larger the company, the greater the likelihood that they have decided on their own to refrain from asking about salary history.

On the other hand, there are plenty of companies that do ask. About 35 percent of survey respondents indicated that they only refrain from asking when the law specifically forbids them from doing so. For those companies that don’t ask about salary history, the survey results indicated that these companies found it relatively easy to implement the ban.

Reasons for asking about candidates’ salary history range from setting reasonable pay and compensation to ensuring that male and female applicants are on a level playing field when it comes to salary. Here, we’ll consider the pros and cons of requesting candidates’ salary history and some of the things that companies should consider before implementing such a policy.

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Know the Rules

The topic of wage disparity between men and women persists, and conscientious companies are always looking for ways reduce the wage gap. While some experts don’t believe that a wage gap actually exists, there have been several studies that prove otherwise. For example, a study conducted by the American Association of University Women stated that, on average, women earn nearly 80 cents for every dollar earned by a man in the same full-time position.

Many states have addressed the issue of requesting job candidates’ salary histories by putting a ban in place. The ban prohibits companies from even posing the question during the interview and hiring processes. Massachusetts was the first state to pass such a law. In addition to banning questions about salary history during the interview process, the law sought to boost transparency during the interviewing process by regulating employer conduct. Prospective employees are now able to make reasonable inquiries about pay and other benefits during the interview. In the past, many employers would discourage candidates from asking about pay, meaning the person would only find out about their salary and other benefits after a formal offer was extended.

Other cities and states that have implemented a ban on requesting candidates’ salary history include Delaware, California, New Orleans, New York City, Puerto Rico, Pittsburgh, and San Francisco. In 2019, Oregon will implement a law that prohibits employers from screening employees based on salary history, and any company that violates the law will be forced to monetarily compensate employees or applicants.

 

Past Salary Dictates Compensation Structure

Companies in favor of asking about salary history often note that doing so helps them to create a fair and balanced compensation structure. HR professionals can help companies to make progress in this area by collaborating with management to determine job-specific duties and how these are relevant to compensation and employee benefits. This goes beyond the traditional notion of basing salaries on the local job market or general industry standards that don’t take companies’ nuances into account. HR can also conduct internal wage audits to assess the general office climate when it comes to salary and benefits. If most of the current employees are dissatisfied with the pay structure, it’s likely that prospective employees will also be uninterested.

A less-than-stellar compensation structure can present an uphill battle when recruiting and retaining talent. While non-monetary compensation such as vacation time, telecommuting, and recognition programs are great, salary is a major factor when employees consider applying to a company.

Of course, all compensation reviews should be undertaken with the legal implications in mind. Since the laws pertaining to compensation continue to change, HR professionals must stay abreast of these changes while remaining true to the company’s core values and operations strategies. While HR leads the process, it cannot do so alone. Enlisting the help of leadership for direction is key.

 

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How Internal Promotions Are Related to Salary History

Aside from attracting new talent, salaries are closely related to internal promotions and transfers as well, although to a lesser degree. It has been reported that nearly 90 percent of employers consider salary history when determining how to compensate employees moving to a different position within the company.

Promotions tied to salary are a slippery slope because, in most cases, the internal applicants already know the salary of the new position. In fact, the salary may be a major reason why the employee sought the promotion in the first place. According to employment attorney and HR consultant Kate Bischoff, it can be tempting for employers to increase salaries in relation to what their employees are currently earning. However, the market for that specific job may not justify such an increase. This presents a conundrum when promoting a tenured employee who is earning more in the top pay grade for their current role than the bottom of the pay grade in the new role.

One way to take the guesswork out of internal compensation is to develop a straightforward job description that explains the job responsibilities and how the duties will be evaluated. This is helpful because it will help to tie compensation to the duties themselves rather than the job title. The position structure should be regularly reviewed, and HR should be prepared to revise it, as needed.

Undoubtedly, salary negotiations aren’t easy for prospective employees, current employers, or employers. In order to attract new applicants, companies must develop trust, and being open about compensation is one way to do so. If your company finds it hard to decide on a policy of requesting salary history, it may be easier to just be upfront about what the position pays, which gives the candidate a choice in whether they want to continue the process.

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