Employers might ask for a candidate’s salary history information for any number of reasons. Many use it to ensure they can make a competitive offer that stands well above a candidate’s current salary. Some consider salary history to be an indication of the candidate’s experience and achievements, and use it to screen candidates whose wage history is too high or too low for their salary range. And others use salary history in lieu of a compensation strategy to help them determine appropriate compensation for a prospective employee.
No matter the reason, asking for a candidate’s salary history information can have unintended consequences and should be avoided.
The downsides of requesting a candidate’s salary history
There are a few key reasons you should never request a candidate’s pay history.
1. Knowing a candidate’s salary information can perpetuate the wage gap
Using a job candidate’s salary history to make compensation decisions can perpetuate an existing wage gap and lead to pay discrimination. Women in the United States earn 83 cents for every dollar men earn, and other intersectional groups face an even wider gender pay gap. For example, Latinas earn just 49 cents for every dollar earned by white, non-Hispanic men. The wage gap extends to men too. Latinos earn 91 cents and Black men earn 87 cents for every dollar earned by white men.
If an employer makes compensation decisions based on unfair pay practices at other organizations, wage gaps will persist and often widen over time. This may also lead to internal pay inequities on your team, which can damage employee trust and lead to legal trouble under various pay equity laws.
2. Unfair compensation decisions skewed by salary history information can lead to higher turnover
Using a candidate’s compensation history can result in inconsistent pay across your team, which may impact employee trust, engagement, and retention. Forty-three percent of workers say they would leave their current position if they discovered they were paid less than a colleague of a different race or gender doing the same job. Given the racial and gender wage gap, this could result in significant turnover. In fact, 60 percent of women have already discovered they’re being paid less than a male peer in the same role.
Conversely, 82 percent of workers feel more engaged and fulfilled by their work when they are paid fairly, and 81 percent say they are more productive and loyal to their employers.
3. A salary history inquiry may be illegal
Salary history bans across the United States may make it illegal to ask for a job candidate’s prior salary information. For example, California AB-168 prohibits employers from seeking a candidate's pay history and from using it in compensation decisions if a job applicant volunteers it. Other states, like Delaware and New Jersey, don’t allow employers to screen job candidates based on salary history, though they may request it later in the recruitment process.
There are 21 statewide bans and 21 local salary history bans so be sure to check if any apply to your organization. This is particularly important if you plan to hire remote employees in jurisdictions outside of where your office is physically located.
What to do instead of requesting a candidate’s salary history
Some organizations will ask a candidate for their salary expectation. While this is legal, it may not be a great solution either. The expectation gap closely aligns with the pay gap, so you could still end up underpaying people from marginalized groups.
For example, Black women in the technology industry ask for 88 cents for every dollar white men ask for for the same role, at the same company. This is mirrored almost directly in the wage gap, as Black women in tech earn 89 cents for every dollar their white, male counterparts earn. It’s clear that people from marginalized groups base their worth in the talent market around their current salary.
Instead, build a compensation strategy with job grades and salary bands to guide you in making fair and consistent compensation decisions. Some jurisdictions even require a prospective employer to share these salary ranges in their job postings or upon a candidate’s request. For example, employers in New York City must begin listing salary ranges in any advertisements for jobs, promotions, or transfer opportunities on May 15, 2022, and Colorado already requires it.
Adding salary ranges to your job postings has the added benefit of allowing a job applicant to self-select out if your salary range falls below their salary expectations. Many employers will share the hiring range as a subset of their internal salary range to account for what the organization is prepared to pay a new employee.
Final thoughts on salary history
Even if your jurisdiction doesn’t have a pay history ban, you should consider banning this practice in your own organization in order to ensure fair, consistent compensation. Following salary history bans, employers increased pay for job changers by about five percent. But women saw an eight percent increase in pay, and Black employees saw a 13 percent increase. This is a strong indication that eliminating salary history questions can help close wage gaps and promote internal pay equity. This, in turn, will help you retain your team members as so many other employers fall victim to the Great Resignation.