Stop asking candidates for salary history. Do this instead.
Salary negotiation can feel like an awkward, tense dance between employers and candidates as both sides try to land on a number. One way that employers have sought to navigate these discussions is to ask upfront for a candidate’s salary history to get an idea of what a candidate may be expecting to earn, what other employers thought their skills were worth, or to eliminate candidates from consideration who they believe may be out of budget.
While seeking to reduce the discomfort may be a noble aim, it can have unintended negative consequences for both the employer and the candidates. Here are some of the reasons to skip asking the salary history question and how to land the best candidates without the awkwardness.
In several states, asking is illegal
In recent years, a number of states and localities have enacted legislation making it unlawful to ask a candidate about their previous wages. Aimed at reducing pay disparities, close to half of the states in the U.S. have at least some restrictions regarding salary inquiries. These restrictions range from disallowing screening based on salary history to requiring that employers provide a position salary range to candidates who request it and mark an increasing trend nationwide.
Asking for salary histories can perpetuate pay gaps
Candidates who have historically been paid less than their peers may see this trend continue when salary history is considered. The previous number becomes an “anchor”, where the new employer may offer a percentage above the previous wage.
A Boston University study recently found that in some counties in Massachusetts were asking the question was banned, women made 8 to 9% more and Black employees made 13 to 16% more versus neighboring areas where the question was still permitted.
“What it says is that a lot of that persistent wage gap — it’s related to something about the bargaining process,” says James Bessen, the executive director of the Technology & Policy Research Initiative at Boston University School of Law.
An employee who believes they are paid fairly is more likely to stay
Rather than invoking the pay history question, a process where incoming employees feel confident about fairness can lead to better retention. According to a recent survey, less than half of US employees report understanding how compensation is determined at their company. On top of that, employees who perceive a pay gap, whether or not one truly exists, are 16% more likely to leave the organization.
What to do instead
Organizations can narrow their lists of candidates, attract and retain top candidates, and move more efficiently through the hiring process by adopting a few changes to their talent acquisition practices.
Formalize your compensation strategy
Having a formal compensation strategy allows your hiring team and your HR department to move faster by providing a framework for more efficient decision making. Deciding what tools or sources you will use to determine position ranges, how aggressively you want to pay relative to the local market, how years of experience, education, and certifications will be considered, and how often you want to reevaluate those ranges will allow your HR team to price jobs more quickly and accurately.
Provide the position range upfront
Having a simple, upfront conversation about the salary range you’ve set for the role can go a long way toward making the process transparent to candidates and gaining trust. Candidates can then decide whether the budget you have set for the position fits into what they can afford or expect.
These discussions can be part of your initial candidate screens and can be as simple as, “The salary range we’ve set for this position is $X to $X. Does that work for you?”
Alternatively, ranges can be added to job postings so that candidates can self-select out if your budget does not match their expected earnings.
Final thoughts
Finding the right candidate at the right salary number does not have to be a stressful or labor-intensive process. Investing the time upfront in building your compensation strategy and incorporating greater transparency into your pre-screening process can greatly improve your candidate experience, increase employee trust, and lead to lower turnover.
