With salary disclosure laws in the news, there certainly has been a great deal of attention focused recently on whether employers can ask job seekers about their current compensation. In addition to the various jurisdictions that have passed legislation prohibiting such inquires (California, Massachusetts, New Jersey, Delaware, Oregon, Puerto Rico, New York City, New Orleans, with more to come), many companies, such as Amazon, Wells Fargo, and Bank of America, have instituted company-wide policies prohibiting such inquiries.
The question now is, “what will be the impact?” There are mixed views on whether these laws will accomplish their stated goals—to reduce the historic wage gap between men and women. However, these laws, and the policies that are being developed as a result of them, will have significant impact on the hiring process.
One important question relates to the number of employers that will adopt these policies independent of any government mandate. Companies that have multi-jurisdictional operations will likely adopt the no-inquiry policy, because it is too difficult administratively to operate under different sets of rules in different jurisdictions. (In addition, many global companies want to be perceived as being on the cutting-edge when it comes to diversity-related issues.) On the other hand, smaller companies operating in jurisdictions not covered by such laws will likely not change their current recruiting processes.
Employers either covered by the laws or which revise their policies are likely to experience some major impacts with regard to the hiring process. Among them:
1) Employers may start to revamp their application forms, which almost universally request current compensation information. At the same time, it will cause employers to probe more deeply into questions about desired compensation. As it now stands, savvy candidates deflect this question because it essentially asks them to bargain against themselves. One possible outcome will be for certain candidates to decide to voluntarily disclose their current compensation to “set a marker” for the compensation discussion. Care must be taken not to discount candidates who decline to voluntarily disclose. The Harvard Business Review cites a study by Payscale.com, noting women who declined to disclose their salaries were offered less than those who did disclose, whereas men who refused to disclose received offers higher than men who did.
2) Employers may be incentivized to lower base salaries and concentrate more on bonus programs. In this way, employers can still hope to attract candidates who are at the top end or outside the salary ranges, while generally maintaining pay equity among current employees.
3) The importance of written job descriptions are likely to be magnified, in that how candidates’ experience and abilities fit those descriptions will likely become the primary determinant of how they are compensated. That could restrict the flexibility of employers to consider “alternative” candidates who might not satisfy all of the criteria of the job, but who have impressed employers with their potential. At the very least, employers might be forced to issue a revised job description at a potentially lower salary range.
4) Candidates will be harder to close on compensation, leading to more turndowns. When faced with the desired compensation questions, many candidates will inevitably err on the low side to ensure that they keep their candidacy alive. In the end, however, those candidates may hold out for a significantly higher number.
5) Outside recruiters will become more valuable as a necessary intermediary. Good recruiters earn the trust of candidates and can better understand their motivations when it comes to compensation issues. They also can effectively probe into the candidate’s rationale for a desired compensation package. Recruiters with these skill sets and a real-world perspective of salary trends in a particular discipline can often determine the acceptable target range more accurately than a direct representative of the employer.
Again, it should be emphasized that the vast majority of employers in the U.S. are not currently covered by these laws. But even for those companies, the public discourse on this topic may provide them an opportunity to reevaluate their processes and potentially make adjustments so that they can continue to attract top talent.
TMG’s Take is a regular e-mail advisory produced by The McCormick Group. The company’s Legal, Government Affairs, and Law Firm Management groups combine the expertise of more than 15 Consultants to help law firms fulfill all of their lawyer and administrative recruiting needs. TMG’s Take covers topics across the spectrum of law firm management, including associate and partner compensation, growth strategies, marketing and business development, operations and facilities management, finance and accounting, professional development, and technology. Please direct all inquiries to Steve Nelson, Managing Principal at (703) 841-1700 or snelson@tmg-dc.com.
