New Jersey has followed the lead of numerous other states and cities, and, effective January 1, 2020, enacted a “Salary History Ban” in an effort to reduce or eliminate wage gaps in the workforce. This ban may affect your current hiring practices, so it is important to understand what this means for your business and how you should make adjustments.
If your business has been asking for a potential hire’s salary history during your hiring process, it has in all likelihood been in an effort to determine whether the candidate’s financial requirements fall within your pay range and whether they are a fit for your business. Inadvertently, this has affected protected classes by basing a new employee’s rate of pay on a history where the individual was perhaps paid a lower wage than his/her coworkers. In order to stop this cycle and prevent this differential from occurring from employer to employer, a person’s past salary can no longer be used to determine the rate of pay at which you hire them.
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So, how can you, as an employer, determine whether a candidate’s salary expectation falls within the range you are willing to pay? There are a few approaches you can take to ensure both sides are on the same page. The positions for which you hire should have a pay scale—it may range, and perhaps be wide— but it should exist, and you should even consider including this information in your job postings. This way, potential applicants can eliminate themselves from the candidate pool if they are seeking a much higher rate of pay. During your application and interview process, instead of asking a candidate for their salary history, the questions should instead be “what is your salary requirement?” or “what is your current salary expectation?”. These questions will help you eliminate candidates who have unaffordable requirements.
Once you have decided on a candidate and only after a candidate has been extended an offer, and is fully informed on your compensation package, their salary history no longer needs to remain confidential. You then may ask them to disclose salary history in order to perform a reference check to verify previous employment, should you wish to do so.
This new and important information needs to be communicated to all involved in your hiring process. HR and hiring managers should be trained on the proper questions to ask, and job postings and applications requesting salary history should be revised. Making these adjustments is worth it – these simple changes can keep your business from incurring fines of up to $10,000 per violation!