New Salary History Laws – Will Your Compensation Strategy Hold Up?

by Sarah Reynolds - August 8, 2017
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Delaware and Oregon just joined Massachusetts, Puerto Rico, New York City, California, and Philadelphia in addressing pay equity by enacting laws that prohibit employers from asking job applicants about their salary histories. Why is asking about pay history a problem? It’s perpetuating a long-standing gender wage gap.

The general practice of creating offers by taking a candidate’s previous salary and adding 10-20 percent on top of that is outdated and problematic. Considering that women get paid 6.6 percent less than men in their very first jobs – a stat taken from a 2013 study from the American Association of University Women – women are continuously put at a disadvantage when employers base their offers off of previous salaries. Having men’s and women’s salaries already start separately will yield very different lifetime incomes and impede women’s economic mobility.

Salary History Laws Promote Fair Pay

Eliminating salary history from the interview process will force employers to turn to market data when making their offers - a major shift in hiring practices in some organizations.

The bans are an important step in the ongoing fight for equal pay. Even though the gender wage gap has fallen significantly in the US over the last couple of decades, data by Pew Research indicate women still make 83 percent of what men make on average. Women can never fully evade lowball offers and sexist employers. However, the most important aspect of these laws is that they are happening – lawmakers are finally confronting pay inequity and trying to close the pay gap.

Public-policy solutions will certainly combat wage disparities, but employers can also take steps to promote pay equity. The biggest step is to take a hard look at their own compensation programs to check for any pay parity issues. If there are discrepancies in pay, either intentional or as a result of misguided practices, employers need to discuss them with their employees and adjust their salaries appropriately. Moving towards pay transparency will also help to promote pay equity within individual companies and in the market. When employees are being paid fairly and feel confident they can talk with their employer about pay concerns, they will feel valued and will be less likely to look elsewhere for a job – driving the retention levels that employers need to be successful in today’s competitive job market.

Download White Paper – Transparency in Compensation: Trends and Best Practices

Download this white paper from Lighthouse Research to learn how you can establish an appropriate level of pay transparency in your organization.

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