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Salary Histories: Why They Shouldn't Matter

March 30, 2018

 

You’ve heard the old adage: there are three things to avoid in polite conversation; politics, religion, and money. When hiring, it’s been commonplace to ask for a candidate’s salary history. But, today, this is a practice we have moved away from; not because it isn’t polite, but for several reasons including fairness and legal issues.

 

Before getting into why asking for salary histories is not a good practice during the hiring process, let’s look at some of the reasons this has been widely used in the past.

 

  • More bang for your buck: Payroll is one of a company’s largest expenses. When a candidate is asked their salary history, if it is in the range of what an employer has budgeted to pay, it is easy to draft an offer that is just a little bit higher than what the potential employee was making at their last job.

  • It’s the easy way out: Rather than doing market research and looking at salary data to determine fair compensation for a role, asking salary history of candidates gives an overview of what the market is paying for similar positions.

  • You get what your pay for: By asking for salary history, sometimes you may be trying to gauge the value of the worker. As different candidates come in, an assumption could be made that higher paid workers must be worth more. They must be of greater value and more productive than other candidates with similar jobs who are paid less.

 

These all seem like valid reasons to ask for pay histories, but they can be extremely problematic. Think about the following reasons why asking for candidate salary history is not the way to go.

 

  • Let’s even the playing field: It’s time to address pay inequities that have been in play for years in regards to women and minorities. Even today, women earn on average approximately 80 cents to every dollar a man earns. The statistics for minorities are even worse. Someone who has been subjected to pay inequity shouldn’t be subjected to that their whole career.

  • Don’t take the easy way out: Asking for salary history can be a “lazy” way to determine fair compensation for a role.

  • Was salary history ever a good benchmark? As stated above, should someone who has been underpaid, either because of inherent pay inequities or perhaps they took a job at a start-up, be penalized for a low salary history.

 

So if you’re not relying on salary history, what should you be doing?

 

  • It’s time to do the research: There is plenty of data out there to use in terms of salary comps. Because much of the data compiled includes the salaries of men, women, as well as minorities, it gives a good overview.

  • Determine your company budget: Take a good look at what your company can afford to pay. If you are a new company, your workers may indeed be underpaid, but you may have something else of value to offer such as career growth and/or soft benefits. Beyond that you should always consider internal equity when setting a compensation range.

  • Focus on skills, competencies and experience: You may develop a range for the position based on the candidates past experiences and the skills they have. Be transparent about your salary range allowing candidates to make a decision early in the process rather than eliminating candidates because you feel their salary history has been too low or high.

 

Finally, states and cities are starting to ban the practice of asking for salary history as part of the interview process. Currently, New Jersey, New York, Delaware, Massachusetts, California, and Oregon have enacted state wide bans. Pittsburgh, PA has a ban in place as does New Orleans, LA. Philadelphia passed a ban in 2017 but it is not currently enforced due to litigation. However, this move away from asking about salary histories appears to be picking up steam, so it’s time to think about dropping the question all together if you have not done so already.

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