Why Salary History Bans are a Good Thing

For years we have been struggling to close the pay gap for minorities and women. Part of the reason this problem has persisted is because employers have required prospective employees to disclose their previous salary which is then used as a benchmark for determining offer salaries. Fortunately, this practice is going the way of the dodo. As of October 1st with the addition of Maryland, there are now 17 statewide prohibitions on employers requiring salary history from job applicants. You can check the status of your state by clicking here to view salary.com’s listing of state and local bans.

I have been an advocate of employers not asking for salary history because this practice helps to solve pay equity issues and it because makes good business sense. I am pleased to report that we have four new states now banning employers from asking salary history of candidates since I last wrote about this topic in 2018.  See Why Not Asking Salary History is a Step in the Right Direction

It is encouraging that salary history bans appear to be making an impact. Research from Boston University shows that after implementing salary history bans, overall pay for job switchers increased (5%) with significant increases for African-Americans (13%) and women (8%). Click here to view the report. I have noticed a growing number of organizations are going a step further and listing salary ranges on job postings. This is good news

While listing salary ranges on job postings is certainly not required, it is important that you know the salary range you are willing to pay before beginning the process of searching for a new employee. With this information, you can save time by quickly eliminating candidates with salary requirements outside of your range.

Larger organizations tend to have an established compensation philosophy that drives salary ranges and is linked to a variety of factors such as financial position, organization objectives/strategic plan, market information, and legal compliance. While most smaller organizations may not have a formal compensation philosophy, they generally know what they can afford to spend and have some perspective on salary ranges in their geography and industry. With this information, you don’t need to know candidates’ salary history. You can quickly determine if salary expectations align by either asking candidates about their compensation expectations or by providing them your salary range. Applicants can then self-select if they want to remain in the candidate pool.

If you need help with your salary ranges or compensation philosophy, IgnitionHR can help.

Click here if you would like to schedule an introductory phone call.