Infographic: Are You Aware There Is A New Law That Prohibits Hiring Managers From Asking About Prior Earnings?

Have you heard about the law that now prohibits employers from asking about compensation history that has gone into effect in 9 states, with more to follow?

This new legislation has earned a surprisingly low level of publicity, so we thought it may be helpful to put together some best practices on how we are going to be changing our interview protocols.

To gain insight into how best to adhere to this new law, we asked 500 senior HR professionals for their suggestions, and came up with some terrific advice and insights into the potential ramifications of this change in interviewing style.

I admit to being adamantly opposed to this change when I first heard of it, believing that prior compensation is a huge component of making a good match. After learning what it would take to have a candidate make a career move, what he liked and didn’t like about his current role, and what he would consider a ‘Dream Job’, at that point the next question was always about current compensation, comp history, and salary requirements to justify making a move.

Not being able to aggregate that critical piece of information felt like being prohibited from gathering essential pieces of a candidates total profile. After talking about this issue in-depth the past few weeks, I have changed my tune, and now have come to the realization that a candidate’s skill set and experience , and their salary requirements are ultimately more valuable information than what they have earned in the past.  

I think Breanne Buzay, SPHR – CA, SHRM-SCP said it best. “ This will not change my approach to recruiting in the slightest, as I have not, for years now, asked for salary history. Instead, I have always asked for “expectations around compensation“, because I have learned that existing comp for an individual can be dependent on a variety of factors, most of which are outside of the control of the individual. Company size, comp philosophy, length of time in business, location, industry, etc. along with how quickly someone progresses within their career and how often they have changed jobs, can all impact compensation. Because of this I have never believed that prior salary history is a legitimate and accurate weathervane for position or performance. In addition, I believe that you should pay people for the experience and skills that they bring to the table, the work that they will be doing, and the value of that work within the organization, which should not be lowered just because someone had previously made less, which is the intent behind the law (specifically in consideration of the gender pay gap)”. 

As Breanne states, it is ultimately not fair to penalize someone who may have chosen to work in a role for less than competitive wages at some point in their career…for instance, if someone chooses to work for a non-profit and agrees to accept less than market value in terms of financial compensation, is it fair to penalize them in future salary negotiations for that altruistic decision? I think not. 

With that said, many HR professionals shared their concerns that the regulatory burden of all these different laws will be daunting, since we currently have multiple jurisdictions imposing different rules, so until the federal government weighs in, there is undoubtedly going to be some confusion and anxiety regarding attempts to stay in compliance of the law. 

What if your corporate HQ is located in a state that currently does not have this law in place, but you are interviewing a candidate that resides in CA? 

To be on the safe side, we have decided that it is best to just wipe out salary history questions across the board, and instead switch our approach to simply asking what a candidates salary requirements are, as opposed to what their salary history is. 

This will be an interesting shift, since it then puts the ball squarely in the candidates court. Research shows that smart candidates typically rank salary as #3 for importance in making a career change, with #1 being career path, where a move will position them 3-5 years down the line, and #2 being quality of life. With salary consistently coming in at #3, good interviewers should continue to aim to determine what is truly the motivating reason for a candidate making a move, and then after ascertaining what they are looking for, verifying that they indeed meet all of the qualifications for the role, at that point ask them what their salary requirements are. 

For roles that have a set salary, we have always shared that information at the onset, to best value everyone’s time. Clearly the most difficult roles that will be affected by this new ruling are sales roles that are heavily weighted with commission earnings. The general philosophy in building commission plans is to keep someone from starving to death with the base salary, but hungry to hit their monthly overhead by having to earn commissions. Without having their current salary history at hand, building motivating sales commission plans will be most strongly impacted. 

For opportunities that offer a base salary range, typically determined by how qualified someone is and how much they are currently earning, I still do not believe that is wise to ever share that entire range, since the average person will always focus on the highest end and be disappointed at the offer stage if they receive anything other than that top range. 

Our plan is to revert back to the candidate, asking what their salary RANGE is, and see if it falls within the range of the opportunity we are recruiting for. If not we will address it at that point. 

Ultimately, isn’t a candidates stated salary requirements as valuable information as their salary history, in terms of making a good match? 

Asking for salary history creates at least the temptation to bend the truth, but asking a candidates salary requirements put them in a position to honestly share what they want.

The stickler will be determining the difference between what someone needs, and what they want. 

We have had quite a few people address this issue from a candidates point of view, sharing some concerns from that standpoint. What if a candidate declares a salary requirement figure that is too high, and list themselves out of a job? What if they say too low, and cheat themselves out of what may be a higher base?

We have already had multiple candidates ask us our advice on the best way to answer that question, and our advice has remained the same as before, by simply saying they are open in terms of what would be considered a fair salary, dependent on the work involved. As they say, the first person to talk specific figures, loses. How will this new legislation change that? Predictably candidates will then be pressured to provide a range, as opposed to just saying ‘open’, which will then allow the interviewer the ability to say if they fall within the range of the opportunity, or not. Clearly, the sooner everyone has that discussion, the better, so we don’t all invest valuable time in the interview process, only to find out at the end that there is not a match in terms of a candidates salary requirements, and what a company is willing to pay for a specific skill set.

Lucien C. Jervis, SPHR, SHRM-SCP shared this insight, and I have come to wholeheartedly agree with his take on this change in employment law. Lucien states that “overall, I do think this change is a positive move. It will force employers to do their homework by developing better interview questions to draw out what value each candidate might bring to their organization. It will force hiring managers to invest the time needed to draw up realistic job descriptions, job requirements, and determine what those skill sets are worth to the organization, and ultimately what they are willing to pay for it".

Removing the focus from ‘dollars’ to ‘value’ is a big step in the right direction.