California recently became one of eight states, cities or localities to pass legislation banning all employers from asking one particularly awkward question of prospective workers: How much did you make in your last job?
Yet companies apparently aren’t convinced the laws will work as intended.
The aim of many of the measures is to help close the gender pay gap. The idea is that if employers do not set new wages on the basis of past compensation, one low salary or poorly negotiated job offer early on in her career won't set a woman back for years to come.
But some two-thirds of the 108 companies surveyed by executive search and consulting firm Korn Ferry recently said they thought the measures would not, or would only to a small extent, improve any pay differentials that exist.
The likely reason, said Tom McMullen, a senior client partner for Korn Ferry, is that employers either already feel they have the rigorous pay systems in place to monitor for pay equality. Or the actual gap between male and female employees' pay at the company — accounting for position, experience, job level and the like — is only in the single digits.
"For those that already have decent processes in place, it probably is a nonevent," McMullen said, noting that the survey skewed to larger companies. "The biggest difference it'll make is in those organizations that have a 'let's make a deal' culture" and do not rely as much on market data to set workers' pay or have less rigorous ways of analyzing whether they are paying workers fairly.
The survey also showed that many employers do not seem prepared for the new laws, many of which take effect next year, although some have a grace period before penalties for noncompliance kick in. Almost a third said they are not prepared for the legislation, while 44% said they had made "some preparations." Just 5% said it was already their practice not to ask about a candidate's pay history.
The survey did not ask what impact the new laws could have on payroll budgets or salary size overall.
While the salary-question bans, which are often part of "pay equity" or "pay transparency" bills, may have generated attention for their potential role in closing the gender gap, other employees could benefit, too.
More market-based approaches to wage setting — in which employers compensate workers on the basis of the needs of and competition for the job, rather than the history of the person — could help any prospective employee who worries that he or she has been paid too little in the past. (Discussions about salary expectations, rather than history, are expected to still pass muster.)
Jonathan Segal, an employment lawyer based in Philadelphia, said the bans could be particularly relevant for older workers. Someone who has been working for more years and may be looking to scale back to a less demanding job — or workers eager to get back into the workforce after being out of a job and willing to work for less — could be subject to implicit bias when asked about their past pay, he said.
"Eliminating the question may help not only eliminate the pay gap for women," he said, "but may help older employees who are being excluded because employers think they won't be happy working for less."
He also sees employers adopting the ban even in areas where it is not required.
"I see a significant number of employers that are voluntarily omitting this from their application," Segal said, "even in absence of legal mandate."
Forty-six percent of the companies surveyed by Korn Ferry said they would comply with the legal requirements in the most stringent location where they operate. That means workers well outside Massachusetts, California or Oregon might no longer be asked about their salary history during job negotiations even if their local jurisdictions do not pass similar laws.
Only 32% said they would comply as each region requires, while 11% said their operations were not affected and another 11% said they were unsure. (The National Women's Law Center reports that a few more states are expected to pass similar prohibitions this year. Other jurisdictions have passed measures only for public employees, and a version was introduced in Congress last year. Philadelphia's measure has faced a legal challenge.)
Korn Ferry’s McMullen said that while some firms are being advised to maintain separate policies, "that gets messy really quick."
Workplace-related laws that start in local jurisdictions often spread to others, he said, because multistate or national companies decide that having a single policy rather than a patchwork of practices is simpler.
"There will be a tipping point, if it's not there already, where this will become the de facto way of handling this in this country," McMullen said. For many companies, having a blanket policy "is easier administratively."