Pay equity continues to be a hot topic: shareholder activist groups, politicians, and Hollywood stars are talking about it. For a number of companies, it’s deeply embedded in their external brand.
Equal pay has been under the regulatory spotlight for a while now, and more states (and some cities) are upping the game with new legislation. While these requirements continue to evolve, one trend is quickly gaining popularity: Prohibiting employers from asking job applicants about salary history. Based on the premise that wage discrimination follows the market value of women at hire, this legislation aims to create equal footing at the point of job offer. Oregon and Delaware are the most recent states to enact this legislation, joining New York City, Philadelphia, Maryland and Massachusetts.
Without salary history, many employers are concerned they won’t have a key component of information to make an offer that’s acceptable to the candidate. Employers are asking, “What can we do?”
Rethink how you approach the offer process.
Develop a list of questions (such as the list below) that avoid reliance on salary history to shape the offer:
- What can I do to ensure the offer is fair and equitable?
- Does my offer rightly pay for the skills and competencies the job requires?
- What does the candidate bring to the table and what’s the internal equity for similar jobs?
Addressing these questions inherently makes the process gender-neutral. It also opens the door for a more collaborative negotiation, with both the employer and candidate exploring what parts of the offer are flexible to meet their needs.
Have compensation, legal, talent acquisition and management teams jointly develop a game plan for the evolving recruiting process.
Rather than react to legislation as it emerges, plan for a time when asking salary history isn’t an option.
- Legal counsel must confirm what questions may be asked (e.g., “Can we ask about salary expectations?”).
- Talent acquisition should encourage an open dialogue with candidates.
- “We can be flexible if you are the right fit for the job”
- “Can you tell me what parts of our offer aren’t meeting your expectations?”
- Compensation should ensure that the salary guidelines reflect the organizations pay equity objectives and provide guidance to ensure they are enforced.
- Plan a process with clear governance for exceptions when the candidate is highly desired.
- Anticipate a longer negotiation cycle to get the compensation right and adjust managers’ expectations for the time it will take to fill vacant positions.
Provide the talent acquisition team with compensation guidance that includes both hiring salary ranges for vacant jobs, as well as local market trends and compensation practices.
Compensation professionals typically provide hiring salaries in line with internal pay guidelines (that is, rates similar to what others in the same role earn that are aligned with the midpoint of the salary range for the role).
Best practice is to build a range around the hiring salary so there’s room to consider offering a lower or higher salary based on the candidate’s experience or a specific desired skill set. Similar to the guidance provided in administering salary structures, compensation teams can help recruiters determine how best to use these ranges and apply them when making offers to candidates.
Compensation teams can provide further guidance for recruiters by:
- Inventorying and developing hiring salary ranges for all jobs using market data and internal pay guidelines.
- Preparing local market data exhibits for recruiters’ reference, highlighting premium markets and compensation practices trends for specific roles or functions.
- Performing additional analysis in support of harder to fill positions to ensure rates are competitive with the current market.
As we continue to see the prohibition on asking salary history take hold in other states and cities, employers have to think through the talent acquisition process to anticipate where additional data are needed, rely more on salary structures, internal equity and market data as guideposts for competitive offers, and become more comfortable with a potentially longer negotiation process.
Nancy Romanyshyn is a Senior Consultant and Project Manager with Willis Tower Watson’s New York Rewards Practice with over 18 years of experience. She has worked with clients in a variety of industries, including healthcare, retail, pharmaceutical, insurance, energy, financial services and manufacturing.
Erin Kim is a Senior Consultant in Willis Towers Watson’s Rewards practice in New York with over 18 years of experience. She specializes in the design and implementation of compensation strategies and programs for global clients to manage performance, align employee focus with critical goals and link compensation to business strategies and objectives.