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Resetting the Salary History Conversation

It’s the moment when many a job interview has gotten awkward.

A candidate is breezing through the process, crushing every question and meeting every criterion for the role.

And then the conversation turns to salary.

Applicants often feel like they’re in a tough spot when this topic comes up. Ask for too much and you might take yourself out of the running. Aim too low and you might land the job, but you find yourself underpaid and maybe playing catch-up for the rest of your career.  

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Employers, meanwhile, are usually eager to learn early on if company and candidate are far apart on compensation. Historically, hiring managers and interviewers could find this out by simply asking a candidate direct questions about his or her prior pay, and make an offer based on the applicant’s salary history.

But that approach is fraught with risk, and critics of this practice say asking such questions unfairly lock applicants into a given pay range, and helps perpetuate the existing wage gap.

For that matter, asking salary history questions is flat-out illegal in some places. For example, 19 states have statewide legislation in effect that forbids asking questions about salary history as part of the hiring process. Another 17 have implemented similar laws on a local level.

The city of Philadelphia recently joined the latter list. Effective Sept. 1, a new law prohibits employers in the Workshop of the World from asking job applicants about their salary history.

Some local business leaders weren’t exactly sold on this idea when Philadelphia City Council passed the Wage Equity Ordinance in 2017. The Greater Philadelphia Chamber of Commerce actually sued the city, alleging the ordinance violated businesses’ commercial speech rights. The organization also said there was “little evidence a salary-history ban would put a dent in the wage gap” that such legislation is intended to combat, the Philadelphia Inquirer recently reported.

A legal battle followed, with a federal appeals court ultimately ruling that the city could forbid employers from probing into job candidates’ salary history.

So, the road to banning salary history inquiries in Philadelphia was a bit rough. But, this example aside, we should expect to see more states and municipalities striking down salary history questions in the future. And experts say employers should act accordingly.

Focus on Future Expectations, Not Past Pay
The number of local and state laws regulating the inquiry or use of an applicant’s salary history will only increase, says Deirdre Macbeth, content director, regulatory, at WorldatWork.

Macbeth, a former attorney and chief legal and human resources officer, notes that all of the aforementioned state and local laws were enacted in 2017 or later, with more than half being implemented since January 2019. She attributes this legislative trend to “the heightened focus on fairness in the hiring process to help eliminate pay discrimination.”

Indeed, momentum to eliminate salary history discussions from hiring decisions has been building for some time.

Consider a 2018 WorldatWork survey that found 37% of 838 respondents saying their organizations have implemented a policy that prohibits hiring managers from asking questions about job applicants’ salary history, regardless of local laws in the locations where they operate. Another 40% said their companies were somewhat likely or extremely likely to do so in the next 12 months.

More recent WorldatWork data finds those numbers climbing. An August 2020 pulse survey of more than 150 employers saw 56% saying their organization prohibits hiring managers and recruiters from asking salary history-related questions, regardless of whether local laws forbid such queries.

In addition, 36% reported that their organization prohibits the consideration of salary history in setting pay for internal candidates, with another 17% saying their company is considering such a step.

And, there are certainly ways to determine a fair pay package that don’t include uncomfortable questions about compensation history. To that end, employers should have established pay structures in place for each role within their organization, based on their relevant market, industry and available budget, says Macbeth.

“Salary benchmarking should be conducted on a regular basis to adjust those pay structures as needed,” she says. “An applicant’s salary history then becomes irrelevant. Applicants are assessed on the merits of their qualifications and experience, and are offered compensation within the available range for the role.”

Questions about applicants’ current job responsibilities are also helpful in filling in the compensation picture, adds Brad Hill, a principal at Clearwater Human Capital, a Chicago-based compensation and pay-for-performance consulting firm.

“This part of the interview could probe the know-how required, problem-solving challenges and accountabilities of the current job. This information would allow the interviewer to assess the current job value, and, based on the applicant’s tenure and performance in that job, [set] fair compensation for their current role.”

Ultimately, employers would be wise to focus on what a candidate expects to earn in the role they’re interviewing for, rather than how much they’ve made in the past, says Macbeth.

“This approach is a win-win for the employer and applicant,” she said. “It allows the employer to avoid wasted effort in the hiring process by determining if the applicant is within the available range for the role and permits the applicant to be fairly assessed on the merits of their qualifications.”

About the Author

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Mark McGraw is a staff writer and editor at WorldatWork.


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