Published on October 20, 2017
By: David Weaver, CCA
Any idea what's happening January 1, 2018? Yes, I’ll be watching the Tournament of Roses Parade from Pasadena, California, but that's not what I'm talking about. This coming January, the new salary history restrictions under the AB 168 adds Section 432.3 to the California Labor Code, takes effect. The new law will not only prohibit salary history inquiries but also prohibit employers from relying on an applicant’s salary history as a factor in determining whether to offer employment or determining what salary to offer.
Employers will be prohibited from seeking salary history information (including compensation and benefits data) about an applicant, either personally or through an agent. An exception exists for salary history information that is disclosable to the public pursuant to federal or state disclosure laws such as the California Public Records Act and the federal Freedom of Information Act.
Further, upon reasonable request, employers must provide an applicant with the pay scale for the position being sought. The law does not define “pay scale.”
Essentially, the law means employers are no longer allowed to ask prospective hires about their salary history. The new law is designed to help combat gender-based pay disparities; as Compensation professional and a huge supporter of equal pay for equal work, I couldn't be more excited.
As an employer, however, you may be thinking, "If I can't ask how much they previously made, how can I make a competitive offer?" Luckily, there are several other ways to offer fair, competitive salaries to new hires. In fact, you'll probably improve your hiring process along the way!
Let's take a look at some of the best ways you can prepare for this new law:
- Participate in salary surveys. Since you won't be able to inquire directly about someone's previous pay, having access to competitive market pay data for your industry, company size and geography is crucial. Take a look at the CHRG Compensation Survey which is free for participants.
- Conduct a market analysis. Are you trying to hire top talent? (I hope so!) If so, comparing your internal pay rates to external salaries can help determine where you stand in the market, allowing you to make the best offer possible.
- Develop salary ranges. Except when playing roulette, it rarely makes sense to just throw numbers out willy-nilly. Instead, create internal pay guidelines that define the range of pay within your organization, depending on the position.
- Determine pay increase guidelines. Giving raises based on merit and seniority rather than a person's gender or demographic isn't just the right thing to do - it's the law. Luckily, it's easy to allocate salary increases fairly if you have your salary increase guidelines predetermined.
- Create a hiring range. Not to be confused with a firing range, this is simply the preset salary range that your company is willing to offer new hires.
- Embrace pay transparency. Showing your employees how their salary stacks up against your organization's pay ranges is a great idea. Not only does it show them they're being paid fairly, giving a glimpse of your pay ladder can inspire ambitious employees as well!
- Communicate, communicate, communicate. When everyone (employees and managers alike) knows the drill with your pay system, treating everyone fairly becomes a lot easier.
Usually, managers don't have ill intentions when asking about a new hire's pay history. But, studies show discriminatory bias - even if subconscious - is more prevalent when they do. Instead, use this new law as an opportunity to help you nail down your strategy for offering the competitive salaries top candidates seek.
If you need help navigating your preparation for this new act, don't be afraid to ask! Shoot me a message and we can probably help you.
© 2017 David Weaver. All rights reserved.