Christine Baron, SHRM-CP, is a Human Resources professional driven to maximize the power of the employer-employee relationship to achieve optimal & sustainable business success, and employee growth + satisfaction.
Legal prohibitions against asking for salary history from job applicants are gaining momentum across the United States. City by city and state by state laws are being enacted to prevent a pattern of lower pay from allowing women to reach full pay equity with men.
While the goal is widely supported and worthy (in my opinion), it is meeting resistance because the new laws challenge the traditional approach to hiring and salary negotiations. Employers are accustomed to being in control and negotiating for the lowest salary for the best qualified candidate.
That’s capitalism right? Sure, but it’s a system that creates a disparate impact on women and minority groups. It is also a power play that is held over from another era. Historically, employers held all of the information regarding salary data. Employees and job candidates only knew what they made and maybe had access to some information through a trade association.
The balance of power in salary negotiations has shifted. This social movement toward pay equity could not have taken root 10 or even 5 years ago because the negotiating power was still firmly one-sided.
Two Big Changes Putting Power into the Job Seeker’s Hands
Technology has been instrumental in balancing the power dynamic in salary negotiations. In the past, job seekers had access to almost no salary information. Prior to the era of big data and crowd sourcing, salary information was only available through the Department of Labor; large, expensive salary surveys; or surveys performed by trade associations.
That began to change as the internet became a popular source of information and companies like Indeed, LinkedIn, and Glassdoor began crowd sourcing salary data.
Now, job seekers can get salary information for a specific role, in a specific city, and for a specific company in many cases. At the very least, they can gain access to salary data for the role they are seeking in the city where they want to work and judge the value of a job offer accordingly.
2. Labor Supply
Similar to technology, the changes in the labor supply are giving the job seekers much more power in salary negotiations. Overall unemployment checked in at 3.7% in July of 2019. This is where the laws of supply and demand come into play. Supply is low and demand is high. Therefore, a job candidate has many more options for jobs than they did in 2009 when unemployment was at 9.5%.
Technology gave job candidates the information they needed to determine their value and the tight labor market has given them the opportunity to leverage it.
What Should Employers Do?
Its important for employers to note that the way we work has also changed. Workplaces have changed from highly structured organizations that are managed from the top down, to relatively flat organizations with distributed decision making authority and collaborative work teams. More than ever, business success depends on the employees’ knowledge, skills, and desire to do the work. Employees want to feel like partners rather than subjects. Partnership and mutually beneficial relationships require a win-win salary agreement.
- Don’t ask about pay history. Pay history really has no relevance to how the business values the position or work that the employee performs.
- Establish a salary system that is linked to the market value of a role, the internal role responsibilities, and to business profitability. This is a must-do for business success above and beyond salary negotiations.
- Share your pay ranges with job candidates. The candidates will self-select out if the range is not acceptable to them. Also, your competitors already know what you pay. They’ve likely been looking online and talking to your employees.
- Embrace integrative negotiations. Find the right mix of salary, bonus, benefits, opportunity, and balance for your employees. Its never just about the money.
It appears that NOW is the the time for a movement for gender pay equity. Personally, I really hope it succeeds. However, it is essential to recognize that even such a powerful movement does not succeed in a bubble. There are many social, economic, and technological systems that help and hinder it. A pay equity movement would not have gained any momentum a decade ago because job seekers had no leverage in negotiations. Now that they do, it is likely that there will be many changes in the area of total compensation, above and beyond pay equity.