On September 29, 2019, the salary history ban went into effect in Illinois (where I’m based), officially prohibiting employers from inquiring into a job applicant’s salary history. Illinois joins a growing list of states and municipalities that have passed laws aimed at ending the cycle of pay discrimination by removing questions about an applicant’s salary history. While this intention is laudable, the ban adds a new twist in the ongoing challenge of salary negotiations — especially for companies with operations in multiple states with conflicting regulations.
It’s easy to view the new salary history ban as a regulatory frustration; however, I’m encouraging companies to focus on an unexpected upside. The salary ban is an opportunity to rethink how your business approaches salary negotiations, address the common problem of pennywise and pound-foolish thinking, and strengthen your company’s reputation as an employer of choice.
Rethinking Value: Focus On Potential, Not Cost
Salary negotiations can become lose-lose when money is the only focus. Yes, it’s natural for companies to seek the best talent at the lowest possible cost. Unfortunately, in some cases, this means nickel-and-diming top candidates to save a few thousand dollars a year — savings that may have only a minimal impact on the bottom line. Worse, by splitting hairs over compensation, companies risk alienating their top candidates. New hires who do accept lower offers can be less engaged and motivated, and the money a company saves may be lost in reduced performance.
The right hire is not a drag on overhead. This hire could be the accountant who saves your company seven figures by instituting process efficiencies. Perhaps this is the manager whose dynamic personality excites the entire department, pushing everyone to perform at a higher level. Or, this could be the well-connected leader who speaks so enthusiastically about their work that your company benefits from a huge reputation boost, making it easier to recruit game-changing talent. Focus on the potential, not just the salary.
How To Approach Pay Negotiations With A Salary History Ban
Once you’ve shifted the focus to a candidate’s qualifications and potential rather than getting a “good deal,” this changes the negotiation equation. For example, a common concern I hear from companies is a fear of overpaying. Without a candidate’s salary history, companies worry they won’t be able to make an appropriate offer.
You do not need to benchmark the pay against what a candidate previously made. What would you pay someone who has the desired skills, experience and education, and also aligns with your company culture and fits with your team? What does your current budget allow for this position? What is the current market rate for similar positions at your competitors? Is your expected salary range in line with what the market demands? What other components will be part of the total compensation package? These questions can help you set expectations and zero in on an appropriate salary range.
As more states and municipalities pass bans on asking about salary history, companies can either drag their feet or lead the charge. I’m encouraging the latter: Employers who lead the charge gain a critical first-mover advantage, benefitting from transparent salary negotiations. This is a huge employer brand boost that helps to make your business an employer of choice.
First, by embracing this rule — even if there is no requirement to do so in your state — you’re seen as a company that cares about closing the gender salary gap. Secondly, candidates respond very positively to being told a salary range upfront. You start your relationship with this candidate from a place of trust, rather than contention. Finally, as the salary history ban becomes increasingly widespread, your business benefits from first-mover advantage: You’re out in front rather than playing catch-up.
For companies that prize innovation, creativity and growth, that’s a strong starting position for successful candidate recruitment.