Shhhh… don’t mention the S word!

Since 2017, several US states have made it illegal for hiring managers to ask candidates for their salary details in job interviews in an effort to tackle pay inequalities. There has been a lot of chatter about this on LinkedIn, where US voices often speak passionately in favour of it. Over on this side of the pond, the approach to the gender pay gap is somewhat different, but although a recent petition only garnered 15 votes, some mainstream papers have spoken out in favour, and the US experience is being watched with interest.

Why a ban?

The idea behind the bans is to prevent wage inequality and reduce gender bias in the hiring process. As women are often paid less than men for the same role, the theory is that asking for salary history will perpetuate low pay for women and minorities, disadvantaging them from the outset. Instead, the focus will be on paying candidates what they are worth. In the US, women are paid an average of 20% less than men doing the same job, and the stat is considerably worse for women of colour.

Massachusetts was the first state to implement the ban, with several other states and cities following suit. The laws are not identical and have variables, and just to make matters more confusing, two states, Michigan and Wisconsin, have both reacted by passing a ban against such bans (must make for a challenge for employers operating in multiple US states!). Outside of the US, only Canada is currently considering similar bans.

Generally, the laws prohibit employers from asking for, or indirectly put pressure on applicants to reveal, their salary history. They are generally allowed to ask for a candidate’s salary expectations, and in some cases can ask for ‘objective measures’ of productivity, for example bonus payments in sales or commission-based roles.

Pros and cons

Harvard Business Review ran an article sceptical to the ban in 2017, and also provided the only research we managed to find on the subject, by Payscale. It makes for interesting reading, but essentially concludes that the ban might play into the hands of unconscious gender bias in unforeseen ways, possibly disadvantaging women instead. It asks the question “In the absence of information, what information is being assumed?”. Nothing good, it would appear, as women who refused to reveal salaries were found to be offered 1.8% less than those who did.

‘Ban the box’ legislation in the US, banning firms from asking questions on criminal history, has been found to result in fewer black and Hispanic men being hired or even interviewed, for similar reasons. Whilst the salary question ban may prevent employers from basing offers on past pay, it doesn’t prevent them from offering women and minorities less, and it also doesn’t help candidates accurately assess their worth.

Aside from the pay gap issue, both candidates and hiring managers need to be able to judge whether a potential hire would work financially before embarking on a time-consuming interview process. Lack of transparency on expected and past salary makes it harder for firms to determine whether a candidate is within budget, thus making the hiring process less efficient.

There is a flip side to transparency, however. In California, the law requires employers upon “reasonable request,” to provide the “pay scale” for a position to an applicant, which essentially means revealing salary information after the first interview. Asking candidates for salary information is the norm in the UK, but employers are not always so forthcoming when it comes to sharing details on what they are willing to pay for a role. It isn’t always practical for employers to advertise payscales, as some firms wish to keep the information from their competitors, some roles are sensitive internally, and others again are flexible as to the level of seniority of the hire, making the salary band too wide to be meaningful.

However, whether a firm advertises the salary or not, it should certainly have a good idea of the budget and have a firm idea of the value of the role before beginning the process. They should also be willing to share the information fairly early on. Using the interview process to determine pay is poor practice, and unfair on candidates who are investing time and effort. Taking advantage of a candidate’s previous underpayment by lowballing them on pay likewise.

More transparency, not less

There’s no doubt that equal pay is a target we should work towards, but is a ban the right way to go? In the UK it is illegal to pay different amounts to men and women doing the same jobs under the Equal Pay Act. In general, the UK approach has focused more on transparency and representation than in the US, and the corporate culture is different. Pay gap reporting is helping throw light on inequality, and surely a ban would be a step backwards in this regard.

Our experience is that there is a great deal of effort going into bridging the gender gap, at least in financial services, and this is bound to result in changing attitudes and culture over time. We should see where this takes us before implementing a ban which we don’t yet know the outcomes of. Perhaps we should watch and learn from the US experience before following suit.