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When Employers Can't Ask About Salary History

When Employers Can't Ask About Salary History

Is the disclosure of pay history an unfair part of the recruitment process? 

A growing number of states in the US are passing laws preventing employers from asking candidates about their salary history. There are currently 20 bans in place across 17 states with that number looking to increase. With many trends in the US making their way to Australia, what would the impact be if Australian employers could no longer ask job applicants what they were paid in previous roles? 

In July 2019 Lion Co became one of the first companies in Australia to ban questions about pay history during the recruitment process, in a bid to tackle the gender pay gap. The brewing company found that questions about salary history helped to sustain lower salaries for women.  

For employers, the crux of the issue is: does it matter what a candidate was being paid previously and will it make a difference if this is not asked? 

Jane Carey, CEO of Edge Recruitment says " Salaries are always a sensitive topic and many of our clients ask us for advice on pay rates for people in the property industry. All things being equal, a salary range for a role should be established up front. If someone has been paid significantly less in the past, why should that mean that they are not paid a fair market salary for a role going forward?

Employer concerns 

Employers may be worried that recruiting without this information could increase their wage costs. Whilst this is an understandable concern, there are compelling benefits to implementing a ban of this nature. For example, paying more market accurate salaries should lead to greater employee satisfaction and improved retention rates, thus decreasing recruitment and training costs and improving overall performance and efficiency. 

If a law like this passed in Australia: 

  • It would encourage employers to do more research on market salaries for relevant job roles when preparing to hire staff.   
  • It would result in more gender equal salaries and lessen the pay gap between men and women.  
  • It would encourage employers to apply a more merit-based approach to recruitment – focusing on a candidate’s skills, experience and value brought to the role.  

Whilst employers wouldn’t be able to ask what a candidate earned in their last role or previous roles; they would still be able to ask what salary a candidate was looking for.  

Understanding underpaid and higher paid salaries 

If a candidate has been underpaid in previous roles, relying on historical salary information to set a salary may cause an employer to make inaccurate comparisons between them and other applicants. Relying on historical data to evaluate higher paid individuals may also unfairly skew employers' decisions. There may be credible reasons why a candidate has been paid more than others in the past, such as:  

  • Working in high paying geographical locations
  • The rarity of their skill set
  • A candidate shortage of that role at the time they were hired 

In Australia, it is against the law to discriminate against job candidates based on age, gender, race or religion etc., but it is commonplace to ask questions about pay history during the recruitment process. Are we perpetuating an unfair system of pay? Would you welcome the change? We’d love to hear your thoughts.