Illinois Bans Employers from Asking Job Seekers About Their Salary History. Here’s What that Means for Your Company

Companies can no longer ask job applicants for their salary history, thanks to a bill that Governor J.B. Pritzker signed into law in July. The law goes into effect on September 29th, and many companies are going to be unprepared. While the law advances pay equity and could be life-changing for workers, it isn’t a blank check for every job seeker to get paid more just because they ask for more.

Why It’s Important

On the surface, asking for salary history doesn’t seem unfair. If a candidate is making X, the company can offer X + Y, and potentially the candidate would be happy with the increase. 

The problem is: Who’s to say that X - what the candidate’s current company pays them - was fairly determined? Salary history questions are a major contributing factor in both racial and gender wage gaps. 

Gender and race bias aside, two of the most common things we hear from job seekers is that they’re unfairly compensated and/or that their current company doesn’t value their skills enough. The new company may want to be fair, but if they’re basing a new salary on current salary, they’re inadvertently rolling any biases forward.

Where Else This Has Happened?

California, Connecticut, Delaware, Hawaii, Massachusetts, New York, Oregon, Vermont and Puerto Rico.

How to Incorporate This Into Your Hiring Practice

Previously, there were five ways that companies would determine what to offer a job seeker. Here’s how we see those methods shaking out under the new law:

1. Candidate’s salary history

Companies ask the candidate for their current salary, and find out the candidate currently makes $80,000. They tack 10% on top of that, and offer $88,000.

2. Candidate’s salary goal

Companies can ask a candidate for a range of what they’d like to be making. Some people can justify a higher salary, or if their skills are good enough, can hold out until they get the number they want.

3. Utilize External Salary Data

Figuring out how much you should budget for employee compensation is challenging. Salaries are skyrocketing for certain, hard-to-fill jobs. (We’ve put together salary guides for Tech, Sales, Marketing and HR based on all of the common aggregators and our own data.) Among commonly known public aggregators, the data isn’t as granular as it should be, doesn’t take a lot of factors into account, and doesn’t cover a lot of specific skill sets. As more and more states pass laws like this, there’s going to be an increased demand for salary data services.

4. Interview Evaluation

If a candidate is asking for $100,000 do their skills justify it? That is nearly impossible to assess in just a few hours of interviewing. Assessments or projects help, but with unemployment practically zero, not all job seekers are willing to invest 10 hours towards an assessment or take-home project. Regardless, companies have to get better at evaluating skills AND cultural fit.

5. Internal Equity/Payscales

This correlates closely to no. 4. If your company has multiple people in the same role, hopefully you have salary bands. Companies try to evaluate new talent and fit them into bands, or compare them to what they are paying existing employees. It is a recipe for disaster to pay new people more than your existing team. Existing employees will inevitably find out if they are being paid less than new employees. 

And now that it is illegal to ask about someone’s salary history, companies will have to get innovative and utilize the other four steps more effectively. That means better defining their interview process and making sure they are truly gauging the skills and experience of job seekers.

What The Ramifications Are If You Don’t Adhere to It

It isn’t a simple answer. The State of Illinois can fine your company $5,000 for each time it happens. Individuals that are asked about their salary history can sue for $10,000 + attorney fees. 

What Else Can Go Wrong?

Hiring people is hard. Negotiating compensation is at best an awkward dance where both sides try to agree on something fair. Companies and job seekers want to avoid a lengthy interview process only to find out at offer time that the job seeker’s expectations were way higher than the company had in their budget. That is a waste of everyone’s time. Transparency is key.

• Companies need to state their compensation ranges. Post the range, the midpoint target, the bonus, etc. 
• Job seekers state their targets. If something is posted in the $80,000—$100,000 range, and the candidate is targeting the $95,000—$100,000 range, articulate that, or run the risk of going through an entire process only to get a low offer and wasted time. If a candidate is asking for the top end of the range, they better have the skills and experience to back that up.
• When companies and job seekers consider what they’re able to agree to, both sides should keep in mind the total package. Is there flexibility in terms of schedules or the ability to work from home? Are there great benefits or perks? Is there a sign-on bonus or annual bonus?
• If the two sides are still struggling to meet in the middle, get creative. Offer an early review and tie specific achievements or accomplishments to an increase in compensation and/or responsibilities.

The takeaway here is trust. New legal standards are changing the steps involved in most of these negotiations, but regardless, this is the start of a new relationship that is hopefully long-term. Both sides need to be transparent about their intentions and build this new relationship in good faith.