A Future Without Salary History
Now late-February, the annual January hiring kickoff is (hopefully) starting to translate to some promising resume submissions and candidate interview scheduling. Unemployment remains low and the market favors job-seekers, so those of us driving the hiring process already have our work cut out for us to find and attract in-demand talent. And increasingly, there’s another hurdle on our minds: Salary History Bans.
Why Ban Salary History?
Broadly speaking, salary history bans are policies that prevent employers from asking potential employees questions about their past salaries, benefits, and compensation as a basis for a new pay package. Salary history bans are increasingly impacting hiring practices in major real estate sector markets, including California and New York. Bans now affect hiring practices in 17 states and 20 localities, according to a running tally by HR Drive. More are slated to enact bans in the coming months, and several others are altering the terms of their existing policies. Last month, New York and New Jersey revised their statewide bans to cover all employers, expanding from hiring for governmental agencies. Last week, Philadelphia courts upheld the city’s ban despite pushback from local employers.
Salary history bans alleviate some potential awkwardness regarding compensation during the interview process. But their intended function is even more important: Salary history bans are designed to help to close the wage gap. Women and minorities often earn less than their male and/or white colleagues in equivalent positions, even when accounting for education levels and on-the-job experience. In real estate-adjacent industries, pay equality can be especially complicated.
If you caught our Pink Collar blog on women in the title insurance sector, you might remember that while women make up 74% of the production forces, they earn less than the median wage across the board. As we’re in the middle of Black History Month, it seems especially important to remember that redlining, or historically discriminatory housing and lending policies, hugely impacted the mortgage and housing space—not to mention the consequences that may have had for hiring in our sector.
Salary history bans are aimed at alleviating multiple sources of the wage gap, including historic stigma that female- or minority-dominated jobs intrinsically have less value. As Harvard scholar Laura Adler noted in her 2019 talk for the American Sociological Society, “the use of past salary can entrench inequalities over the course of the career.” That is, low past wages provide a lower baseline for future wages.
We also naturally imbue salary history with meaning—sometimes that a low wage signifies low productivity or skill-value in a potential employee. But even this perception can be skewed—especially when comparing the compensation capabilities of major corporations to stand-alone title shops or real estate brokerages.
If Not Salary History, Then What?
The bottom line is that there’s a reasonable case that salary history questions are, at least, problematic. On the other hand, asking about compensation history has been—and often still is—an important part of how we gauge a candidate’s fit. With 37 jurisdictions and counting enacting bans, we’re increasingly likely to run up against them in our hiring processes. The bans likely mean some strategic restructuring in how we approach the interview and compensation process. Promisingly, an emerging body of research suggests salary history bans benefit employers as well as employees. But how do we deal with salary history bans and the gap they might leave in our interview questions?
- Be Consistent and Transparent
Though it may seem like common sense, having regular and open compensation guidelines in place is still considered best practice by many. One such approach might be to adopt a tiered system for determining pay based on experience or instituting a company-wide benefits summary. Such resources can give both employers and employees a consistent reference for the interview process and beyond and may even reinforce equal pay for equal work and experience. With compensation policies spelled out, compensation can be related to an internal standard, rather than an external one like salary history. Even if such resources aren’t the right choice for your business, continuing to track how you uphold equal pay for equal work can still help to promote a healthy work environment for you and your employees.
- Take the Proactive Approach
Even as salary history bans become more popular, there are still more than 30 states and countless localities that haven’t adopted such policies. In fact, Michigan and Wisconsin have bans against salary history bans. However, even if your locality hasn’t yet instituted a ban, there’s a decent chance you might run up against one elsewhere, as employees increasingly relocate for or telecommute to work and as large corporations do business across multiple states or cities. Taking a proactive stance and removing the salary history question out of your interview process before its mandated can potentially cut down on confusion for you and anxiety for interviewing candidates. And if a salary history ban does find its way to you, your process will already be revised for the change!
- Ask Better Questions
As MarketWatch summarized in a January article, some promising early research has shown that employers screen their candidates much more meaningfully when they aren’t able to draw conclusions about skills based on past compensation. One of our go-to alternatives is, “What motivates you in the workplace?”—which may organically reveal compensation needs, but will hopefully encourage more meaningful reflections about what a candidate needs in order to be successful. Asking several open-ended questions encourages a candidate to more thoroughly illustrate their personality and their skillset. This can translate to a better fit for your team and your budget. Instead of focusing on a salary history ban as a restriction, it might be better to think about it as an opportunity to get to ask better questions.
- Know The Market
With resources like Glassdoor, PayScale, and LinkedIn increasingly offering salary insights, quick access to average salaries is easier than ever. These tools and many others can factor education, experience, and local cost-of-living in to general salary expectations for the role. Coupled with knowledge about the company’s compensation abilities and a general sense of going prices for a position, salary can be determined from a broader, more scientific source than a candidate’s personal experience. And this tip works for candidates, too! One of the most powerful pieces of information for a candidate to take to an interview is a knowledge of their market worth. Knowing how your salary—or desired salary—lines up with the going-rate can be an excellent negotiating tool; it takes some of the onus off of their personal background and puts it on the market itself.
Overall, the fine print of each salary history ban varies by jurisdiction. But in general, they prevent employers from asking potential employees about their prior compensation—including salary and benefits—in order to establish a baseline for their new pay. For now, salary history bans are here to stay. Taking an intentional and open-minded approach to the bans can be beneficial for your company, your hiring process, and all potential (and current!) employees. They’re intended to be a positive corrective to social inequality, and using these four tips can help you to be part of the solution.