Don’t Ask, Do Tell? Employers Banned from Asking Salary History in New York

4 Minutes

A law banning employers from asking job candidates about their salary history will be in eff...

A law banning employers from asking job candidates about their salary history will be in effect in New York City from October the 31st this year. Several other states across the US have also put through the legislation, including California. The aim of the new law is to help close the long standing gender pay gap, which, according to the US Census Bureau, leaves women earning 80 cents to every dollar earned by men. As future salaries are often based on past salaries, employees can find themselves perpetuating the gender pay gap.

Employers can still share a position’s anticipated salary or salary range and benefits, and discuss an applicant’s salary and benefits expectations. What they can no longer do under this law is ask about their salary or benefits at their current or previous employers, or ask their current or previous employers directly for this information. Recruitment agencies also can’t inquire about salary and compensation from an applicant on an employer’s behalf. Applicants can, however, voluntarily offer up their salary history to a prospective employer or recruitment agency, and offer consent to the recruitment agency to share this information with a prospective employer.

These next six months will be crucial to whether this law achieves what it sets out to do in making a real change to the gender pay gap. My concern is that allowing for voluntary disclosure of salaries may put candidates in a difficult position. Exercise your right not to disclose your salary history, and you may be at a disadvantage if other candidates continue to do so. Employers may favour those who disclose salary history over those who don’t, believing it is a signal of their honesty and openness. On the flipside, those who choose to be secretive may be stigmatised, even if it is well within their rights to be so. I suspect that the law may lead to a counter-offer culture, where prospective employers and applicants are expected to bargain hard over salary packages, with the first offer on the table always a low-ball one.

Clued up candidates may fare well in this new system, but for those who rely on their meritocracy to speak for itself may struggle with this type of barter system. That is assuming employers don’t try to find loopholes to get around the law. Global businesses may be able to find ways to mobilise their offshore offices to find out salary history, for instance. How state's police this law will be crucial to its success. Rosh Jayawardena, Elliott Scott HR’s Associate Director in New York, says there has been mixed feedback on the law: “It is positive that it puts accountability on the client to provide context on compensation.

For certain level roles, however, particularly those with a sales focus, it will be difficult not to discuss existing compensation which is often tied closely with performance,” he says. HR departments will need to review their hiring policies to meet these new laws, changing the conversation away from salary history to salary expectations. Employers will be relying more than ever on market insights provided by their recruitment partners to formulate compensation packages that align with market expectations.

Specialist recruiters in particular, with their in-depth knowledge of their sector will be able to provide employers and applicants alike with advice and guidance on their markets. Whatever we think might happen we have to hand it to the powers that be for trying to address a problem that clearly exists. What will be even more impressive is how they follow up and monitor this law, tweaking and tailoring things to ensure that this law truly does what it sets out to achieve.

If you wish to understand more on how this law affects you and the HR function, reach out to your Elliott Scott HR consultant.

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