Asking an applicant’s previous salary history can perpetuate pay discrimination.
That’s why laws in New York City and Suffolk County prohibit such a practice, and come the New Year all employers in New York will be affected by a similar ban.
For employers that haven’t adjusted now’s the time to start revising your applications and hiring practices.
“It’s something that employers really need to pay attention to and be proactive about,” says Lydia Frank, vice president of corporate and product marketing at PayScale, a compensation software and data company based in Seattle.
In New York, the legislation recently signed by Gov. Andrew M. Cuomo that prohibits employers in the state from asking job applicants and current employees about their salary history takes effect Jan. 6, 2020. See https://tinyurl.com/y5zsdydn for the law’s requirements.
Regardless of the law, “pay equity should be a top priority for every organization,” says Frank, noting it directly impacts a company’s ability to attract and retain talent.
Employees want to be paid fairly, and relying on salary history could perpetuate inequity among certain demographics traditionally paid less, says Frank.
For example, a PayScale report found that women overall now earn 79 cents for every dollar earned by men. This is the uncontrolled pay gap that measures median salary for all men and women regardless of job type, seniority, location, industry and years of experience.
Still many companies have used past salary to set compensation.
“Especially for smaller companies that don’t have access to good salary information, it was over-relied on as a way to set compensation for new hires,” says Christine Ippolito, a principal at Compass Workforce Solutions HR consultants in Hauppauge.
Ippolito has been advising clients to do away with that practice since New York City passed the ban in 2017. Suffok’s ban went into effect in June.
She said the ban “forces employers to be smarter about understanding their internal compensation practices.”
Employers need to understand what the market pays, what their employees are making and why, plus the value of each job to their organization, said Ippolito, who has removed the salary history question from clients’ job applications.
There are various sources employers can use to get a handle on salary, including the U.S. Department of Labor’s site, https://onetonline.org, she said.You can also have a professional compensation analysis done.
Barbara DeMatteo, director of HR consulting at Jericho-based Portnoy, Messinger, Pearl & Associates in Jericho, uses Manhattan-based Astron Solutions to give clients compensation data. “It gives you a solid foundation on how to base compensation levels,” she said.
Though employers can’t ask previous salary history, she said, they can ask for a target salary or range the applicant’s looking for.
Employers would be best served training anyone who is part of the interviewing process on what can and cannot be discussed, she said. It even pays to designate one person to negotiate salary so there’s no miscommunication, said DeMatteo.
Consider though, that if an applicant voluntarily and without prompting discloses his or her salary history, say during negotiations, an employer is allowed to verify that salary history with a third party, said Michael Schmidt, vice chair of the labor and employment department at Cozen O’Connor and managing partner of its Midtown NYC office.
He advises employers to check applications and policies to make sure the salary history question is removed; to train staff on the new requirements; and, when asking for references or other documents to verify past employment, to request that the applicant or third party redact any wage information.
He said he’s already seen employers in the area eliminating the salary history question.
“It’s been a slow shift, but definitely its been a shift,” said Schmidt.
DeMatteo agreed it's been a slower shift locally, noting there will be a learning curve for employers to acclimate themselves with the law.
Show Me The Money
Pay disparity is real. According to a recently released PayScale study, women reach their peak earnings at the age of 44, earning on average $66,700. Men reach their peak earnings at the age of 55, earning on average $101,200.