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New Salary History Ban Is Here to Stay

February 23, 2018
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A new law could have a real impact on negotiating salary and total compensation
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The art of negotiating salary and total compensation in the recruiting world is changing. Multiple states and cities have ratified salary history ban legislation. Some of these laws have gone into effect, while others will be enacted over the next few years.

The laws are designed to eliminate the “pay gap,” suggesting that previous salary history could lead to gender-based wage discrimination. Each state or municipality has one-off provisions to their salary history banning laws, making it even harder to keep up with. New York City recently enacted a new law that prohibits employers in the city from asking about, relying on or verifying a job applicant’s salary history during the hiring process. What? A new day is dawning.

These laws will change the recruiting and hiring process for millions of new hires, and in some ways, could backfire and completely negate the purpose of the law’s intention. Think about having to dance around questions regarding someone’s actual historical compensation could get dicey. For example, the New York City Commission on Human Rights could impose a civil penalty of up to $125,000 for an unintentional violation and up to $250,000 if the violation is willful and malicious. An individual who wins a civil lawsuit may recover back pay, front pay, compensatory damages and attorney’s fees. Ouch! That’s real money!

Here’s the good news: while employers must focus their questions on the candidate’s salary requests, skills and qualifications, there are plenty of data sources that allow the employer to determine market rates for almost any role—including healthcare IT. We’ve been using tools like this for years. Recruiters and hiring managers are now required to be silent about any salary discussions during interviews and focus on the applicant’s salary demands. We always suggest this topic should be at the very end of the process anyway.

With this legislation, any historical earnings discussions are completely off limits. What this translates to is if a candidate has a higher ask for their compensation that’s not in line with the compensation ranges using tools like Salary.com or Payscale, you can simply tell the candidate you’ve budgeted for this position and the amount they are asking for is not in alignment with your range.

What I like about this is the dance now changes at the end of the interview when the topic of money comes up. The market will begin to shift from what candidates have historically earned as the baseline to using analytical data to determine market rates. This data can be presented in lots of ways and driven by years of experience, education, location and other variables. In some cases, the very purpose of this newly enacted law could actually reduce the compensation for the candidate, resulting in the opposite outcome of the law's intention.

It appears this law is here to stay and will likely be widely adopted across the country. For CIOs accustomed to making lots of decisions using analytical data, this new law should not create headaches as it may for other business leaders. In some ways, this new way of establishing salary and compensation in the hiring process takes the ambiguity and emotion out of the process entirely by using real data to make the offer.

Using real data—now that’s a novel approach!

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