Last week, California became the latest state to make it illegal for hiring companies to ask about salary history in job interviews. The goal of the new law is to force companies to offer fair compensation and take on prevalent wage inequality.
Under the new law, companies are no longer allowed to ask a candidate what they currently or previously earned in an interview, on an application or at any other point in the hiring process. Additionally, if a candidate asks what a role pays, the company must provide a specific pay rate range, instead of a general statement like the compensation is “fair” or “based on experience.”
Massachusetts was the first state to ban such job interview questions last year. Oregon, Delaware and handful of cities and counties have since passed similar laws. With California being the world’s sixth largest economy, many companies now have to rethink how they determine salary and approach negotiations in job interviews.
Fighting gender pay inequality
There are plenty of startling statistics that show women continue to earn less than their male counterparts. Here a few that make the case progress is needed:
- On average, a woman earns about 79 percent of what a man does for doing the same job.
- A college-educated woman misses out on nearly a half million dollars throughout her career due to the gender pay gap.
- Gender pay disparity will not be eliminated until the year 2059 at our current pace.
Even though wage inequality is still a major problem, laws like these are a step in the right direction. The idea is that unfair pay follows a woman throughout her career but preventing questions about past salary can finally be a remedy. When a hiring company finds an ideal candidate, they often use their previous salary to determine what to offer. The candidate is offered ten percent or so more so they feel like they’re coming out ahead. But if a female candidate was earning 21 percent less than a male coworker in her last job, a nominal increase in her salary still means she’ll be underpaid.
If a company can’t base a salary offer on the candidate’s previous wage and is forced to present a salary range if asked, they theoretically won’t be able to pay a female new hire less than they would a male. They’ll instead need to have a specific salary in mind throughout the hiring process and present the same number to every candidate who asks, regardless of their gender.
How income inequality negatively impacts a company
Besides being unfair and simply wrong, having an internal wage gap can hurt your company in a variety of ways. Here are some consequences your company could face for underpaying female employees:
- Lawsuit – Your company can be sued for discriminating against an employee based on gender.
- Embarrassing PR – If it gets out that your company treats women differently than men, it can result in negative media coverage and public outrage.
- The loss of top talent – People will quit if they find out they’re underpaid, plain and simple.
- Low employee moral – If your staff even suspects certain employees have it better than others, word can spread and people will get upset.
How to fairly approach salary negotiations
Even if your company doesn’t hire in California, Massachusetts, Oregon or Delaware, it should still strive to pay a new hire what’s fair. Like this new law calls for, it’s always a good idea to have a range in mind from the start. Here are few tips for determining what exactly is a fair number to offer:
- Discuss salary with the hiring manager and determine what’s within budget.
- Research what other companies pay for similar positions and ensure your salary offer will be competitive.
- Review the compensation of your current employees and make sure no one is over or underpaid.
From there, you can rest assured that any offer you present to an ideal candidate will be appropriate. Some candidates will want to negotiate while others dread haggling over compensation. Regardless of which one you encounter, having an established range will ensure anyone hired is paid what’s best for them and your company.
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