The Controversial Salary History Ban… And What It Means For Our Industry
There is a movement emerging in locations around the country that is forcing our industry to fundamentally change how we approach the hiring process. Various cities and states have passed laws that prohibit employers from asking job candidates for information on their salary history. Proponents of these laws argue that they will help close the gender pay gap, protect individuals from wage discrimination, and help job-seekers negotiate higher starting salaries. Whatever one thinks of the intent of these laws, employers must adjust their methods in the affected locations. And both job-seekers and hiring executives should be wary of potential unintended consequences of the laws.
Currently, all employers are banned from asking a job candidate for his or her salary history in California, Delaware, Puerto Rico, and New York City. Massachusetts and Oregon have already passed laws that will take effect in 2018 and 2019, respectively. City employees and candidates in New Orleans and Pittsburgh are also subject to the ban. In Philadelphia, the ban was supposed to take effect this month on all employers, but it is currently the subject of a lawsuit. Other cities and states are debating similar initiatives as the movement gains momentum.
While the trend is currently limited to a relatively small number of locations, the high-market impact in places like California and New York City is being felt across the industry. Employers in these locations and others are entering interviews and employment discussions without a major metric to guide their decision-making processes. Budget projections and anticipated new-hire costs are increasingly difficult to accurately forecast and therefore, are more susceptible to being removed from short-term plans. Hiring authorities and company leaders in the affected areas are now in a posture of anchoring salaries to generic position descriptions rather than tailoring them to a candidate’s qualifications, which makes it difficult for both sides to negotiate honestly and plan accurately.
There are potential downsides for job candidates as well, despite the laws’ intended effect. As employers reconsider budget plans for open positions, and potentially delay or decide against filling those positions, the number of job openings shrinks and competition increases for job seekers. Also, as starting salaries are increasingly tied to position descriptions, job candidates lose an ability to use their past earning power as a negotiation tool against a lower-than-desired floor.
These laws are certainly a new wrinkle for companies looking to hire in our industry. At a time when open positions well exceed the number of talented individuals to fill them, this ban makes the hiring process even more difficult in selected states and cities. Our firm is on the cutting edge of understanding how to navigate this new process and enabling our clients to do so while still making informed and pragmatic hiring decisions. Particularly if you are doing business in any of the locations that are subject to or may become subject to the salary history ban, we hope you’ll call us today. We’ll help you hire smart.
Headquartered in Charlotte, North Carolina, Schaffer Associates is a national management consulting firm specializing in executive search and organizational strategies for the hardware, home improvement, building materials, and consumer products industries. As the premier management consulting firm serving the industry, we help build organizations and leadership teams that foster corporate growth and success well into the future.