Should Employers Ask Salary History Questions to Candidates During Hiring?

June 29, 20178:45 am1220 views

Even though many states and cities have passed laws or have pending legislation banning employers from asking salary history questions, the research shows it’s still a relatively common practice with many employers and a question many employees seem reluctant to refuse to answer.

PayScale, Inc., the leader in cloud compensation technology, released a new study, “Is Salary History… History? The Truth about the Salary History Question,” providing deeper insights into the employer practice of asking job candidates about their salary history during the hiring process.

“Many organizations ask about salary history to ensure a candidate isn’t considerably above range for a given position, but there are real dangers in using a previous pay number to determine a current offer,” said Lydia Frank, Vice President of Content Strategy at PayScale.

“The best way to set pay is to use market data and to ensure the offer is consistent with the company’s compensation philosophy and practices. In the long run, if compensation is misaligned with the talent market, the employer ends up with pay inequities that are not defensible, employees feel unfairly treated and talent retention becomes a critical problem.”

Here are some key findings from the survey about the contentious salary history question:

  • When asked to provide salary history in an interview, only 23 percent of candidates refused to disclose it:
    — The more senior the position, the more likely a candidate is to be asked about salary history and the less likely they are to provide it.
    — Baby Boomers were most likely to refuse to provide salary history while Millennials were most likely to comply.
    — Boston, where the salary history question will be illegal in 2018, had the highest rate of refusal (30 percent) compared to Chicago which had the lowest rate of refusal (16 percent).
  • Banning the salary history question is not a silver bullet for alleviating the gender pay gap:

A woman who declines to disclose her salary history when asked is paid 1.8 percent less on average than a woman who was asked and did disclose, while a man who refuses to disclose his salary history is paid 1.2 percent more on average.

  • Nearly half (43 percent) of all respondents were asked about salary history in job interviews:
    — Professionals in the finance and insurance industry were most likely to be asked.
    — HR professionals were most likely to provide the salary information if asked.
    — Workers in non-profit and educational organizations were least likely to be asked.
    — Outside sales reps were most likely to volunteer their pay history (22 percent volunteered their salary without being asked, versus just 6 percent of total respondents).

See: How Should You Handle Salary Raise Request from Employees?

“We were surprised to see the data pertaining to the gender pay gap which shows that refusing to provide salary history doesn’t improve the odds of fair pay for women, but in fact has a negative impact,” continued Frank.

“While we don’t know exactly why this is the case, other studies on unconscious bias show that women pay a ‘social cost’ when they advocate for themselves in negotiation situations, because it deviates from expected gender norms. In this instance, managers or recruiters may be reacting differently when women and men refuse to disclose salary history when asked.”

Here is advice to employers who are grappling with the salary history question:

  1. Stop asking the question. Don’t put candidates in an awkward position of having to decide what to reveal about their previous pay. Just asking the question may give candidates the wrong impression that an employer is trying to get them at a bargain.
  2. Price the job, not the person. Determine what the job is worth in the talent market to set the salary range before conducting interviews. Then, employers can place a candidate within the range based on their experience and skills.
  3. Tweak your process of evaluating fit.There are some easy ways to ensure candidates aren’t outside the budget without asking about salary history. Changing the question to “What are your salary expectations?” can garner the same insights without the potential negative impacts.

In addition, managers should embrace (not avoid) the opportunity to talk openly about how pay is determined at the organization.

“It’s also possible that even when women keep a low pay number to themselves, they’re not asking for as much during the negotiation process as their male counterparts. Women should ensure they know the current market value of the position before starting any pay negotiation and take extra care not to let their previous salary negatively influence the monetary worth they place on their own skillset,” Frank added.

Also read: Asia Sees Widening Salary Gap Between the Top Management and Junior Staff

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