Pay equity is a movement that is long overdue in the U.S. As women have become a significant part of our country’s workforce (47% according to the U.S. Department of Labor), this issue has very slowly come to the forefront. According to the 2016 Census Bureau data, women earn 80.5 cents for every dollar a man makes, and it has been slow to come to this. Notably, this is not just an issue for women, but for other individuals who would be considered a minority for various reasons. This year, many cities, states, and individual organizations have taken or are taking matters into their own hands by developing laws, regulations, and processes to mitigate unfair pay policies and move towards closing the pay gap.
As executive search consultants, this movement is certainly impacting our business and how we conduct searches. While there are many areas of the country that still allow an employer or recruitment firm to inquire about salaries and other compensation, there are several who have drawn the line. Most recently, it was New York City. The Big Apple put a ban on inquiring about salary histories starting October 31st. Therefore, when working with our clients in that region, we no longer ask for or provide any type of salary or compensation information to them during a search process unless a job candidate signs a release form stating that they choose to voluntarily disclose that information.
While it can pose a challenge at first, this type of law is valid, necessary, and understandable. Every role within an organization has a value, no matter what gender or type of person is doing it, as long as they are actually fulfilling it successfully.
Another purpose behind the law that can be more impactful is to ensure that, even if a person may be underpaid at one job, that circumstance will not follow them as they progress in their career. If someone is underpaid at the beginning of his/her career, and every time they get a new job, the employer bases that person’s salary on prior salary earnings, it is possible for that individual to have reduced earning potential through his/her entire career.
The new laws may seem like challenges to employers. In reality, they will support organizations in creating internal compensation structures that are fair to all employees. Subsequently, this is likely to make employees feel that they are being treated respectfully, and they are valuable to an organization. This scenario can promote productivity, enhance engagement, and improve retention.
“What the law can’t do is eliminate unconscious bias,” says Helbling Search Consultant Wendy Zang. “The compensation data and software company PayScale
did an interesting study of the impact of refusing to disclose salary information when asked for it. The study found ‘a woman who is asked about her salary history and declines to disclose earns 1.8 percent less than a woman who discloses. If a man declines to disclose, he gets paid 1.2 percent more on average.’ How that translates into a situation where employers can’t ask about salary history remains to be seen. The hope behind the law is that position would dictate the salary.”
A woman who is asked about her salary and declines to disclose earns 1.8% less than a woman who discloses it.
Refusing to disclose salary is most common among the highest income brackets, and for jobs at the Vice President and Executive level.
Implications & Benefits for Employers
“First and foremost, employers need to make sure they are following the law,” says Zang. “These laws vary from city to city, and state to state, and there is pending legislation in many areas. It’s critical that HR and legal teams are aware of the laws that are impacting practices, and training and planning are crucial.”
“The second challenge for employers is going to be revamping processes that are ingrained throughout their organizations. Change is never easy, and when you are accustomed to asking about salary history and basing your negotiations on that history, it is going to be a matter of changing your perspective and operating differently,” Zang says. “It does take some thought and preparation. Many of the laws, including those in New York, do allow you to ask for salary expectations. A company’s hiring team and any outside consultants they are using should know prior to reaching out to potential candidates if they will ask for expectations, at what point in the process they will do so, and how that may impact the negotiation process.”
"Once employers get used to this new method of operating, I think there can be benefits in getting salary expectations established sooner and easing the negotiation process. For employers who can embrace the concepts behind the law and actively promote their dedication to pay equity across both gender and minority gaps, there can be an added benefit of attracting a more diverse talent pool, something every organization wants.“
Job Candidates Have Responsibility Too
Zang says, “Candidates also need to be aware of the new laws and know what to expect from potential employers. There is an extra onus on them to have done salary research and put some thought into realistic compensation expectations. They need to consider what the norm is for the level of the position and what type of reasonable increase they would need to make a career change. Throwing out a pie in the sky number that is out of line with what an employer is expecting to pay will only get them eliminated from the process.”
“Historically underpaid candidates can get a fair shot at pay based on the position they will be executing rather than perpetuating a low salary,” explains Zang. “If an individual is underpaid now and limited to say a 10% increase when he/she switches roles, that gap between what they are worth and what they are getting paid only compounds over time. The law also has the potential to prompt some more honest discussions up front about expectations.”
Checklist for Employers
- Remove salary history questions from job applications, including those that are online.
- Notify recruitment agencies and background check vendors to exclude salary history inquiries as part of their processes. It is also recommended that organizations review and revise all contracts in the same manner, along with including an indemnification obligation should a lawsuit ensue as a result of an agency or vendor failing to comply.
- Notify Human Resources team and managers/employees who have hiring responsibilities of new laws and regulations. Develop a formal procedure for handling salaries and other compensation matters related to job candidates. Furthermore, it is recommended to have these employees sign a document stating that they are aware of the laws and regulations, as well as the company’s processes.
- Review your organization’s website career section to ensure there is no content that could be considered illegal. It is recommended that wording be added that addresses how your organization abides by the law during the recruitment process. It is best to provide that information upfront for candidates so they understand this prior to submitting their resumes and cover letters should they plan to include compensation information within either.
- Consider developing tighter compensation levels for roles, related to years and different types of experiences. This will provide a guideline for determining different salary ranges for a role, and support an offer being fairly and equitably structured.
What can be asked?
- What are your salary expectations?
- What amount of salary are you looking for? What is the range of salary you would consider?
- Are there particular salary, bonus, or benefit requirements that you have?
What else can an organization do?
An organization and its hiring manager can initiate a conversation with a candidate about what motivates him/her, and how he/she may fit into your organization’s internal environment and culture. After all, compensation only represents a part of attracting a new hire and an employee’s overall job satisfaction.
What job candidates need to consider:
- If you consider yourself a high performer, consider signing a release form to disclose your compensation information to a prospective employer. Volunteer your W-2, which can can provide an explanation for your salary expectations. This can make the negotiation process much easier for both you and the organization.
- Don't abuse the new laws and regulations for your own advantage. Doing so may not be the best idea for your career long-term.
While the long-term impact of these laws won’t be realized for years to come, they are definitely steps in the right direction. All job candidates will finally be put on a level playing field, as it should have been from the beginning.