The Pros & Cons of Salary Transparency in the US Recruitment Market14 Apr, 20235 mins
One of the first questions recruiters have always asked candidates is, 'What is your current salary?'. A harmless enough sounding enquiry to gauge an applicant's current level and expectations when seeking a new role? However, with new State laws being rapidly introduced across the US, it is now a question which could land you in hot water, and it is causing many recruiters a headache when trying to pitch a new job at the right level to attract top talent.
As of the end of 2022, there were 28 US States which had outlawed asking about current salary - generally known as a 'salary history ban' - with some States, including California and Washington, introducing further legislation around the subject of salary disclosure in January this year, whereby not only can recruiters no longer ask about current salary but they now also have to include a pay scale or salary range in a job posting if they have 15 employees or more.
What exactly is the salary history ban?
The ban refers to State law which prohibits an employer from, either orally or in writing, personally or through an agent (directly or indirectly), asking for any information concerning an applicant's salary history information, including compensation and benefits.
The idea behind it stems from a positive place within D,E&I, intending to encourage equitable opportunities and equal pay for those who may have been rejected for jobs in the past because they either already earn a very high salary which the employer may deem to be too expensive or because they earn a lower salary which could suggest they are inexperienced.
Even more importantly, an employer may feel they can offer a low wage to that which the role is 'worth' in terms of the necessary skills and responsibilities, as this would still be a salary increase for the individual.
Determining the pay and package to offer an applicant based on previous salary fosters inequality and enables demographic disparities such as the gender pay gap, which continues to be a constant issue in the US workplace. Offering different salaries for the same level role can also cause bad feelings between employees if they are being compensated differently for doing the same job just because of the compensation they received in a previous role. This can lead to an unpleasant working environment and a lack of cohesion within a workforce.
With all of this in mind, it is clear why many States are opting to introduce laws to protect employees to level the playing field regarding remunerations, and recent research suggests it is working. States who enforce the law report reducing their gender pay gap by an average of 2% while the earnings of members of the black community are increasing by an average of around 15%.
However, there is a downside that mainly affects employers and recruiters but also has a knock-on effect on candidates. The main problem with the salary history ban is that, understandably, all candidates want to be paid a top salary and being able to ask about current salary is necessary to determine what an applicant's real expectations are for a role and what package they would accept at the offer stage.
Although legally, employers are allowed to ask what a candidate's target salary range is for a specific role, applicants are often reluctant to reveal this information early in the interview process so as not to sell themselves short, and therefore an individual could get a long way down the recruitment road before finally realising that the role is not suitable based on the pay on offer, which wastes time for candidates and recruiters as well as wasting money and resources for employers.
This explains why some States are now introducing further laws regarding the advertising of job salary ranges, allowing applicants to make informed choices about which jobs they apply for. However, this still creates issues for employers when trying to decide the level to pitch a role at, balancing between being able to attract enough interest without over-compensating by offering salaries which are well above what the job is worth to avoid putting people off or appearing to offer less than their competitors.
In most cases, the law still allows recruiters to ask what a candidate's salary expectations are, and applicants are also free to offer information about their previous salary during the application process. By applying some common sense, both parties can sensibly discuss salary to avoid lengthy hiring processes while offering fair wages.
In addition, if employers strive to set equitable pay scales based on experience, skills and responsibilities for a position rather than concerning themselves with an individual's previous pay packet or demographic, perhaps the need to outlaw discussing previous salary could become moot as candidates will feel less reluctant to offer up the information if they know it will have little bearing on the compensation they will be offered for the new role.
If you are looking for a new position with the right salary or want to attract top professionals to join your team, talk to our dedicated US recruitment team today and find out how McGregor Boyall can help you.