Think Twice Before Asking for Salary History

Wage inequality has been a hotly debated topic in the United States for longer than many realize. It has recently presented itself once again as a prominent issue in the wake of new equal-pay legislation and the public opinion surrounding it.

An article published by the Washington Post in 2016 reveals that women in the US earn 79% of the men’s average hourly wages. When it comes to pay gap by state, New York has the narrowest with 89% earnings ratio (women’s pay vs. men’s pay), and Wyoming has the largest gap with a 64% earnings ratio.

While New York City has lead the way with the new legislation, several other states and cities have begun to follow in their footsteps. States that are expected to implement this change in the next year are Massachusetts, Illinois, Maryland, Maine, New York, New Jersey, Pennsylvania, Rhode Island, Vermont, and the city of Philadelphia. Current projections by the Institute for Women’s Policy Research have estimated the earliest close to the wage gap in the U.S. is expected in Florida in 23 years, and the latest is in Wyoming in 2159. This change is a significant step towards achieving wage equality and female employees will increasingly benefit from equal pay.

Breaking the Cycle

Signed into law by New York City Mayor Bill de Blasio, this legislation is expected to roll out November, 2017, at the earliest. Post-implementation, Wall Street and other private employers in New York City will no longer be legally allowed to ask candidates’ salary history and employers are prohibited from searching for the salary history of candidates. Currently, enforcement on the second tenet of the law is under discussion. Bill Armstrong, VP of Staffing at Global Upside, comments that while this is a “tangible step in the right direction,” with a number of states incorporating this change, it may be too early to ascertain the true effects of the law.

When employees are underpaid and new employers base their salary offer on previous pay, a cycle of underpayment is perpetuated; women in particular find themselves at the receiving end of this practice, exacerbating the gender pay gap. To encourage compliance under this equal-pay legislation, employees who believe their employer has violated this law can report to the Commission on Human Rights in their respective cities. If found guilty, the Commission can penalize the offending employer up to $250,000. Simply put, the law has been designed to effectively end the cycle of pay discrimination and gender inequality in the workplace.

Nevertheless, the initiative to implement this new law has already faced some stern opposition. Wall Street employers are disgruntled as the law will counter their long-established hiring practice. The equal-pay legislation would require what is called “salary framing;” essentially, employers would need to outline a price up front for their candidates and allow the candidates to decide if an offer is agreeable. In current hiring practices, employers begin with setting the person’s salary based upon what he/she is currently making.

Considerations for Employers

Once this legislation rolls out, potential candidates will no longer be required to divulge their salary details. Employers, on the other hand, must now be willing to pay high remuneration for the talent they wish to attract or risk losing them. The implications don’t end there, however. Employers will need to restructure the entire process of applying and hiring, being sure to update all of their forms, applications, and applicant tracking systems that ask for past or current salary. In a way, the law is handing over the power of negotiation to candidates and employers must keep up or risk falling behind.

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