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Should the Salary History Question Be Banned By Federal Law?

Several large companies, and some cities and states, have already banned salary history inquiries. Is it time for a federal law that eliminates the question once and for all?
salary history question
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Progress can be slow. But, when it comes to employers asking about salary history, the tides have been turning for quite a while. And for good reason. We keep learning more and more about how this question potentially hurts workers, especially women.

Who Benefits? Companies, Not Workers

Worker should be paid a fair wage. A fair wage is based upon industry, skills, years of experience, training, education and location. It has nothing to do with salary history.

When employers ask for a potential new hire’s salary history during negotiations, they’re often trying to get away with paying as little as they can. Once an applicant has given their number, the employer will offer maybe 10 to 15 percent more than a candidate is currently earning. This is not how pay should be determined.

(Be sure to do your homework so you know what you’re worth. Payscale’s Salary Survey can provide you with a salary range in less than 10 minutes.)

The Salary History Question Disproportionately Affects Women

Salary history questions are part of the reason for the persistent gender pay gap. Women are stuck between a rock and a hard place when it comes to this question.

It’s not as simple as just refusing to answer: PayScale’s data show that when men decline to reveal their salary history, they earn 1.2 percent more on average. However, when women do the same thing, they earn 1.8 percent less.

A Lot of Companies and Lawmakers Get It

More organizations are realizing that this practice isn’t doing their reputation any favors. Paying workers as little as possible, and paying them unequally, doesn’t inspire trust, confidence or loyalty from employees. In fact, it undermines these critical components of positive company culture. In a tight labor market, attempting to squeeze the lowest rate possible out of new hires might not be the savviest business plan.

“We are, at Dime, trying to be an employer of choice, a place people want to come,” Angela Blum-Finlay, head of Human Resources for Dime Community Bank in New York City, told The New York Times. “If I lowball you coming in, I’m not going to make you feel valued.”

For this reason, many companies have already banned the salary history question. Amazon recently announced a new company-wide policy. They’ll be following in the footsteps of other tech giants, such as Facebook and Google, which already have similar rules in place.

More and more cities and states are getting on board, too. A lot of places have passed legislation that bans companies from asking about salary history. Laws in California and Delaware are already in place, for example. Legislation in other states, like Massachusetts and Oregon, is set to go into effect soon.

A Federal Law Could Be Next 

Banning salary history inquiries is ultimately a win-win for companies and workers, even if it does ask more from employers in terms of research and strategy. But, they’ll be making fairer pay decisions and forging better relationships with employees. Most crucially, these changes are one of the keys to ensuring that workers, especially women and minorities, are paid fairly.

The cities and states that have already banned the question will help to set the precedent. The state of California, with its huge population, is a testing ground. Their law went into effect January 1, 2018. In addition to banning inquiries about salary history, the state also mandates that employers not rely on salary history information to determine pay if it’s offered voluntarily.

If legislation like this is to do what it’s intended to do, employers must be prepared to ignore salary information when it’s voluntarily offered by candidates or third-party sites. For example, Amazon’s new policy bans the use of sites like LinkedIn Recruiter to get information about a job seeker’s past pay.

Perhaps the steady roll-out of these laws across companies, cities and states will help to smooth out the rough edges before federal legislation is put in place. Hopefully, these policy changes will be a success, leading to more equitable pay — and providing good examples to inspire lawmakers to get on board.

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