The trend to ban salary history in the hiring process expands

Bans on asking salary history are attempting to balance compensation.

In the attempt to promote gender pay equality several states and municipalities have made it illegal to ask job candidates about their salary history. Previously Massachusetts, New York City and Philadelphia have enacted legislation to prohibit asking for salary history as part of the interview process. Now San Francisco has joined the ranks, to no one’s surprise.

What the ban says

According to a newsletter from Proskauer the San Francisco ban goes into effect July 1, 2018. It says:

The ordinance, ….will restrict employers from: (i) considering or relying on an applicant’s salary history as a factor in determining whether to make an offer of employment or what salary to offer; (ii) inquiring about an applicant’s salary history; (iii) refusing to hire or otherwise retaliating against an applicant based on failure to provide salary history; and (iv) releasing the salary history of a current or former employee to that person’s employer or prospective employer without written authorization from the current or former employee.

There are some provisions to allow employers to discuss salary information that is “voluntarily” disclosed.  Additionally no employer will pay a penalty until 2019 because of a year-long grace period during which only warnings will be issued.

The reason for the ban

The ban on asking salary history questions is based on the premise that part of the reason for the disparity in salary between men and women is continued effects of past discrimination. The disparity is well documented but there is a major disagreement on the causes of such a pay gap. I am not going to argue those points. But I do want to talk about an assumption that these laws and ordinances make about how companies structure their pay.

Not every company has a pay structure

The underlying assumption in these laws is that every company has a defined pay structure that delineates a wage range for each job based upon identified compensable factors. With such a structure you can pay someone a salary or wage that fits into that structure and do so without knowing what the person made prior to working at your company. If your offer fits into the range and the employee is now willing to accept your offer you are good.
Unfortunately, in my experience most small and midsize companies do not have that compensation structure. They do not have defined wage ranges, rather they operate based on what the person made before as an indicator of what the market is paying, and then decide if they can pay that wage. Often negotiation is involved, which allows the two parties to come to an agreement that is acceptable to both. Outlawing that practice puts the burden on the small company to have compensation work done that may be unnecessary.
Obviously the solution is for all companies to value the jobs they have, even if it is not through a full blown compensation study and then stick to producing offers based on that value. Have an explanation for why you valued the job that way and then make your offers based on what the years of experience and capability entitle the prospective employee to. This will help you insure that your decisions are not based on sex.

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