In the United States, the problem of wage parity between women and men of equal experience and contribution in the workplace is being discussed at the legal level, according to an article in Forbes Magazine. The state of Massachusetts may become the first state to prevent employers from requiring a detailed salary history, as a term of new employment. If the law is introduced, employers will no longer be able to judge salary based on previous salary history, which is good news for employees, but somewhat of a learning curve for employers, recruiters and human resource professionals.
Since this model (if it trends) has the potential to be beneficial for new employees, at reesmarx, we like some of the opportunities it presents. But we are also aware that there can be some detriments for both employer and employee alike, that warrant some discussion.
As recruitment professionals, we often interview people who are underpaid within their industry; people who may or may not be aware of the competitive salary for their role within their region. Frequently, new graduates fall into this category, and are paid at a standard rate when they have no prehistory of professional earnings.
Female professionals can also unfortunately fall within this category, for a number of reasons. Not all women are comfortable with salary negotiation, while others may accept lower paying jobs for personal reasons. For instance, some female employees may accept lower pay in exchange for lifestyle perks or incentives, such as increased vacation time, shorter workweek schedules and other flexible working arrangements that suit family needs.
If an employee has been traditionally underpaid for a role, the lower salary average can be a detriment to negotiating a fair wage. If employers use the average rate, or one that is slightly higher, they may still be grossly underpaying the employee. While businesses are keen to save money wherever possible, underpaying talented staff in high-demand sectors is a habit that can lead to attrition, and high employee turnover. Eventually, the employee will leave in search of better pay, perks and benefits, and with the growing cost of time and money to recruit talented staff, the business can suffer losses that exceed any benefit from underpaying competitive salaries.
We asked one of our recruiters (Matt) for his personal opinion about the advantages and disadvantages of removing salary history as a determining factor.
The Negative Aspect
“When recruiting/enticing a potential employee from a competitor or even another market the ability to utilize compensation as an enticement to make a job change will become difficult. If we have a flexible client who wants the best talent they may be willing to pay more than is typical for a position because the benefit of having that talent offsets the typical cost. Particularly when the candidate is currently employed and not actively looking for a job.”
The Positive Aspect
“Someone that is unemployed or actively looking for work has an opportunity to get a big jump in their earnings as the employer will make the offer based on current market rate. We hope a measure like this will bring wage equality, but it will be sure to take some time for it to work out, as not all circumstances, roles and compensation models are created equal.”
At reesmarx, we pride ourselves on matching candidates and employers based on motivation, character and value to each other. Money is a by-product of this and the last part of negotiations. We strive to learn our candidates’ motivators beyond money, which typically allows for long term stability within the job they accept. If money is the sole motivator, they will quickly jump at the next job that pays more. Building teams requires a strong fit that includes competitive salary, workplace culture, acknowledgement and incentives, and benefits.
We’d like to know your thoughts about salary history as a determining factor of employment compensation for new jobs. Do you feel it is reasonable for an employer to base salary on history, or would you prefer employers to independently evaluate each role independent of past salary? Rate our article below and share your feedback.