Can you make a determination on a new hire with no salary history?

Companies are now being prohibited from asking about wage histories in an attempt to close the wage gap.
Companies are now being prohibited from asking about wage histories in an attempt to close the wage gap.

As a recruiter for several companies in my past HR positions one of the things I always asked for was a salary history. Many of my colleagues did the same thing. Now however, some states and city governments are making it illegal for companies to access this information. Will you be able to make a decision on a candidate without that salary history?

Who has prohibited this practice?

In mid-2016 Massachusetts enacted a law which prohibits employers from inquiring about pay at a previous employer. “The law will also prohibit employers from screening job candidates based on their previous salary or asking salary-related questions until after an offer is made,” according to Lisa Nagele-Piazza, SHRM-SCP, J.D., writing for SHRM. “The general purpose of the Massachusetts Pay Equity Act—which is scheduled to take effect in 2018—is to close the gender gap and make it unlawful for employers to pay men and women different rates for ‘comparable work,’” reports Nagele-Piazza.
Following the Massachusetts’ law is an ordinance that has been passed in Philadelphia which makes it an unlawful employment practice for a covered employer to:

  • inquire about a prospective employee’s wage history;
  • require disclosure of wage history;
  • condition employment or consideration for an interview on disclosure of wage history; or
  • retaliate against a prospective employee for failing to comply with any wage history inquiry.

Why have these laws been passed?

In the name of Equality

The purported purpose of these laws is gender equality. The argument made is that employers discriminate against women if they know their salary level by offering them less than male counterparts may be offered. I personally don’t think that this purposeful discrimination is as widespread as government would like to believe it is. I think the more common act of discrimination is the perpetuation of previous discrimination in a nondiscriminatory way. An employer may offer two candidates 15% more than what they were making in their last job. Both candidates are treated the same, but if the male was making more in his previous position (for any number of reasons) then his 15% increase is going to be larger than the female candidate, thus perpetuation of previous “discrimination.”

The concept of the value of a job

The governments that make these laws argue that the worth of a job should be known to the company making the offer and if the candidate is capable of doing the job then regardless they should be paid
the worth of the job and it should not be based on what the individual made in a previous job. A noble thought, but there are some mechanics that have to be in place for that to be workable. There has to be a stated salary structure and mechanism in place. There has to be a state wage; a stated wage range; an identified minimum, midpoint and maximum of that range. There has to be a wage study that shows the job in question has the skills that are worthy of the money being allotted to that job. If you have that structure in place you can say, with confidence, that an individual doing a job at an identified level should be paid an identified wage commensurate with the structure. I agree with that, there is however a problem with that.

Small businesses don’t have that structure

Bigger businesses may have a compensation specialist on staff that has done the appropriate work to determine the needed wage structure in order to pay employees on the basis of the value of the job, but small companies don’t have that specialist, or even in many cases, a Human Resources person on staff. These companies use a market method to determine the value of job. That is determined by what the person made in a previous, related job. Without the ability to ask what a person has made the hiring company is losing information necessary to make appropriate decisions on compensation. Fortunately, today the internet wage sites have made getting information easier to do, but information is still lost.

History of success

Small companies also use this salary information to make a determination if the candidate has been successfully advancing rather that moving backward. I once had a candidate tell me he has a track record of successful advancement, yet when I was shown his salary history, it was obvious he was in a career slide. Small businesses find that information invaluable in making decisions about the candidates for their positions. Lies can be told about the work that was done, salary histories may tell the truth of someone’s advancement.

Small companies viewed through big company assumptions

These new laws are developed by legislatures or governing bodies through the light of big company processes, that most small companies do not have. By not allowing small companies to use wage history small companies are being put at a disadvantage.

The future

The future however, I fear, is one of increasing restrictions put in place by Massachusetts and Philadelphia. Cries for equality, are going to do nothing but increase the movement toward these kinds of wage background restrictions. Small companies need to anticipate these restrictions and plan for alternative ways of determining appropriate wage levels for open jobs. Using the wage and salary information on the internet can help take the place of having a compensation specialist in place.
Small companies also need to develop interview techniques that will help them determine if someone is capable of doing the job and has been successfully progressing in their career or not.
Being prepared to both adhere to new restrictions and adopt better selection practices will help small companies survive and not suffer in the selection process.

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