Companies Ban Historical Salary Queries To Prevent Compensation Baggage

14 August, 2018
By G-Team in Payroll
Gpayroll payroll software blog - compensation
In a move to prevent potential employees from carrying "compensation baggage", large tech companies - the likes of Amazon and web-hosting company, GoDaddy, are forbidding managers from asking job candidates about their historical pay history.

According to Buzzfeed reports, Amazon implemented this policy on 1 January this year and comes after 13 salary history bans that were adopted at the state and local level in the United States (US).
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The policy states that hiring managers are banned from asking direct or indirect questions in relation to the job candidate's past compensation packages. This includes queries on base salary, variable pay, bonuses, equity compensation and benefits. Additionally, should the job candidate voluntarily provides the compensation information, hiring managers should not take into account the historical salary information when considering the candidate's application.

Likewise, hiring managers should not exploit recruitment websites such as LinkedIn or Glassdoor to obtain a ballpark figure of the job application's compensation history.

The purpose of this move is to eliminate "compensation baggage" when potential candidates apply for a job at another firm. For instance, numerous studies have shown that women at top executive levels tend to earn lower than their male counterparts. With this policy, job candidates, regardless of gender, will be paid according to "what the job is worth".

Concurrently, companies are also attempting to close the salary disparity for its existing employees. Based on a recent memo issued by Citigroup to all its employees on 15 January, the company announced that it is taking steps "to close gender and race pay gaps". This will involve conducting pay assessments using job functions and levels across the various geographies where they have operations in.

Similarly, cloud computing software company, Salesforce has also made efforts to reduce gender disparity by spending close to USD6 million to close it gender pay gap last year.

Will implementing this ban work?

Recruitment companies as well as hiring managers may find it a challenge to recommend the "right" compensation package for potential job candidates. Without a basis of the job candidate's historical compensation details, they might end up under-compensating or over-compensating the new hire.

Despite these herculean efforts to reduce gender pay gap, there is still a long way for companies to go in terms of achieving pay equity within the company. In the Asian context, the traditional mindset that women are supposed to stay at home is still prevalent, albeit less common amongst the younger generation.

Similarly, efforts to close gender pay gap is likely to time-consuming and costly for companies - particularly for smaller companies, which might not have the resources and capital to kick start the initiative. Implementing a ban on inquiring job candidates' past compensation details might work for some companies but it is likely to bring about a new set of challenges for other companies.

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Related article: Variable Pay: Definition, How It Works, Benefits & Providers

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