Pay Equity: Show Me the Money

There are new changes rippling through States in the US that will prohibit employers from asking applicants about their salary history. This will also apply to Executive Search Firms and Recruiters acting on behalf of those employers.

These new regulations fall under the Pay Equity legislation and are aimed at eradicating the pay differentials that still exist between men and women and across protected groups. By forcing companies to determine compensation packages based on the role they are seeking to fill, rather than the previous salary of the applicants, any existing bias in salary levels should be diminished. The new laws are currently being introduced in a small number of states and cities, including Delaware, Oregon, San Francisco and New York (State and City). It’s very likely that more will follow and ultimately it’s expected that this law will become countrywide.

In practice, employers will risk fines if they ask for a candidate’s salary or seek to find it out from previous employers or even publicly available data. Asking a candidate for their salary expectations is OK and we expect to see an increase in those conversations as the primary focus.

In most states we’re seeing that it’s acceptable to have an applicant voluntarily disclose their salary, and that allows more discussion around it and, providing permission is given, verification of the salary. And, although the law will prohibit any discrimination against candidates who don’t disclose their salary, there may be a general trend for candidates to openly disclose it to show a cooperative attitude to potential employers. What isn’t allowed is for Employers or Search firms to try and prompt this voluntary disclosure.

Currently the fines across different states and cities vary quite wildly and its yet to be seen as to how this will be enforced. At the moment it looks like it requires an applicant to make a complaint that they have been asked or that they have suffered salary discrimination. It appears that there may be a softer approach to penalties initially. For instance, San Francisco is giving warnings and notices to correct in the first 12 months of the new legislation before it starts applying fines.

Overall, this certainly require some changes to the way employers and search firms approach the hiring process and the handling of salary negotiations. However, its most likely that companies will quickly fall into line and adopt practices that comply whilst still ensuring they are as informed as possible and in a position to make the right decision about the right candidate for the role at an appropriate salary for what they will be doing. Relying on salary as an easy shortcut for screening or negotiation may now become a thing of the past.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

The Invenias solution

Invenias are committed to providing dedicated tools and functionality to manage and support organizations in meeting the requirements of the Pay Equity legislation. Invenias customers can be confident that these solutions will provide an easy and intuitive way to comply with the new legislation with minimal impact on work flow.