Companies can no longer ask job applicants for their salary history, thanks to a bill that Governor J.B. Pritzker signed into law in July. The law goes into effect on September 29th, and many companies are going to be unprepared. While the law advances pay equity and could be life-changing for workers, it isn’t a blank check for every job seeker to get paid more just because they ask for more.
Why It’s Important
On the surface, asking for salary history doesn’t seem unfair. If a candidate is making X, the company can offer X + Y, and potentially the candidate would be happy with the increase.
The problem is: Who’s to say that X – what the candidate’s current company pays them – was fairly determined? Salary history questions are a major contributing factor in both racial and gender wage gaps.
Gender and race bias aside, two of the most common things we hear from job seekers is that they’re unfairly compensated and/or that their current company doesn’t value their skills enough. The new company may want to be fair, but if they’re basing a new salary on current salary, they’re inadvertently rolling any biases forward.
Where Else This Has Happened?
California, Connecticut, Delaware, Hawaii, Massachusetts, New York, Oregon, Vermont and Puerto Rico.
How to Incorporate This Into Your Hiring Practice
Previously, there were five ways that companies would determine what to offer a job seeker. Here’s how we see those methods shaking out under the new law:
- Candidate’s salary history
Companies ask the candidate for their current salary, and find out the candidate currently makes $80,000. They tack 10% on top of that, and offer $88,000.
- Candidate’s salary goal
Companies can ask a candidate for a range of what they’d like to be making. Some people can justify a higher salary, or if their skills are good enough, can hold out until they get the number they want.
- Utilize External Salary Data
Figuring out how much you should budget for employee compensation is challenging. Salaries are skyrocketing for certain, hard-to-fill jobs. (We’ve put together salary guides for Tech, Sales, Marketing and HR based on all of the common aggregators and our own data.) Among commonly known public aggregators, the data isn’t as granular as it should be, doesn’t take a lot of factors into account, and doesn’t cover a lot of specific skill sets. As more and more states pass laws like this, there’s going to be an increased demand for salary data services.
- Interview Evaluation
If a candidate is asking for $100,000 do their skills justify it? That is nearly impossible to assess in just a few hours of interviewing. Assessments or projects help, but with unemployment practically zero, not all job seekers are willing to invest 10 hours towards an assessment or take-home project. Regardless, companies have to get better at evaluating skills AND cultural fit.
- Internal Equity/Payscales
This correlates closely to no. 4. If your company has multiple people in the same role, hopefully you have salary bands. Companies try to evaluate new talent and fit them into bands, or compare them to what they are paying existing employees. It is a recipe for disaster to pay new people more than your existing team. Existing employees will inevitably find out if they are being paid less than new employees.
And now that it is illegal to ask about someone’s salary history, companies will have to get innovative and utilize the other four steps more effectively. That means better defining their interview process and making sure they are truly gauging the skills and experience of job seekers.
The takeaway here is trust. New legal standards are changing the steps involved in most of these negotiations, but regardless, this is the start of a new relationship that is hopefully long-term. Both sides need to be transparent about their intentions and build this new relationship in good faith.