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The Pay Equity for All Act: What’s going on with it, and what employers need to know right now

Posted on: September 21st, 2017 | Category: Government Regulatory & Compliance Issues, hiring process, Our Blog

Pay Equity for All Act and asking salary historyIt’s September 2017. Do you know if you can still ask job candidates about their salary history or not?

As we promised back in February of this year, we are keeping tabs on the progress of the Pay Equity for All Act of 2016 (H.R. 6030). It was legislation introduced during the Obama administration aimed at preventing employers from asking about salary history as a means of addressing pay inequity that women and minorities face. It is now under review, but seen as unpopular with the current administration and Congress, and so likely to be thrown out. And yet, here we are months later, left wondering what ever happened to that bill about asking job applicants about their salary history.

A quick recap

Earlier this year, we told you about how the Society for Human Resource Management (SHRM) reported that the Pay Equity for All Act would allow the U.S. Department of Labor (DOL) to assess huge fines against employers who violate the law by asking questions about an applicant’s salary history. Prospective and current employees would also be able to file private lawsuits against employers who violated this legislation, receiving up to $10,000 in damages, plus attorney fees. Of course, employers across the nation took notice.

Then in June, the magazine Money reported that the legislation was on life-support since being reintroduced in May, and it unlikely to be made into law:

On the national front, Rep. Eleanor Holmes Norton (from Washington, D.C.) reintroduced the Pay Equity for All Act in the U.S. House of Representatives in May. The bill—which initially proposed during the last Congress—would bar employers nationwide from asking about previous salaries. The legislation has not moved ahead, however, and legislation tracking site Skopos Labs predicts it only has a 12% chance of being enacted.

It should be noted that, states and cities have implemented their own versions of this regulation, including Massachusetts, Philadelphia and New York City.

Is this kind of legislation effective? The Harvard Business Review has questions.

Many experts wonder if the Pay Equity for All Act might just be a misguided effort for reaching its intended goal. According to a new article by the Harvard Business Review, there are real doubts about the bill. The article summarizes a survey of 15,413 job seekers conducted recently by the compensation data and software company Payscale. The survey looked at the relationship between salary history questions, gender and pay that was ultimately offered. The results were eye-opening:

The widely held assumption is that revealing your salary history, especially if the number is below market value, could negatively influence the offer made by the employer with whom you’re interviewing. However, this study revealed that a woman who was asked about her salary history and refused to disclose was actually offered 1.8% less than a woman who was asked and did disclose. Meanwhile, if a man refused to disclose when asked about salary history, he received an offer that was 1.2% higher than a man who did.

Yes, you read that right. Not talking about pay did not benefit a woman as expected. The study authors note that with all data analysis, individual circumstances can vary, but on a macro level these findings don’t necessarily jive with the premise of banning the salary history question in order to level the compensation playing field for women. The way to create a more level playing field seems to involve far more than the salary history discussion with job candidates.

The Harvard Business Review article acknowledges that more research is needed and that pay inequity for women and minorities does exist. How to deal with it in meaningful ways still matters.

The Pay Equity for All Act is Band-Aid legislation on salary

Hiring is so expensive to begin with, and losing the ability to gauge pay based on previous employment in order to not to waste both the hiring manager and candidate’s time may make the process even more costly. Salary expectation is a huge factor for all parties involved, and this legislation would make it the elephant in the room. Small companies often don’t pay the same as larger ones, and they rely on the discussion of salary history to tout what they can offer beyond pay in order to compete.

“I understand the reasoning behind the legislation,” says Tina Hamilton, PHR, president of myHR Partner. “But the real issue is gender equality in setting pay within entire industries. Legislation should address that directly rather hitting small and mid-sized businesses with minor, incremental steps towards the greater goal that will hurt their ability to hire the right people.”

Hamilton notes that avoiding discrimination in all its forms is in a company’s best interest, and that examining hiring practices periodically to address issues is important. “Focusing on modern HR practices creates a better hiring process that protects your company from litigation, and promotes a work culture where employees are happier,” she adds. “It’s worth it on many levels.”

What You Can Do Now

“If you learn a candidate’s previous salary and find they were underpaid,” says Hamilton, “you can take the opportunity to show that your company has a commitment to equal pay by bringing it up during the negotiation.” Imagine the appeal to high-talent candidates and the positive brand-building buzz that could result from a company saying, “Based on your previous salary, we believe you were underpaid. Our company is committed to pay equality and would like to offer you $_____ instead.”

Sadly, notes Hamilton, the only way to know if a candidate was previously underpaid is to ask. If new legislation prevents that, smaller businesses will especially be at a disadvantage because they won’t be able to present to candidates that they are committed to pay equality. “Open dialog matters.”

“Avoiding the appearance of discrimination is important, no matter what the future holds for some of these proposed laws,” says Hamilton. “Business owners may be surprised to learn that some of their practices can somehow be inadvertently construed as discriminatory.”

Some things to consider doing, she suggests:

  • Training will bring your hiring managers up to speed on regulatory compliance and best practices
  • Conducting an HR audit that includes your organization’s pay and hiring practices
  • Having pay practices in place that are clear to everyone, with structured salary levels, and make them realistic so that managers can stick to them
  • Making pay criteria objective and measurable, so that starting salaries, awards and raises are part of a fair formula
  • Documenting clearly what factors are used to determine salary, promotions, bonuses, etc.
  • Making sure your documents are user-friendly and archived properly

“A lot of good can come out of updating older procedures and documents, even beyond the issue of avoiding the appearance of discrimination,” says Hamilton. “like implementing streamlined processes and establishing ways to collecting useful data.”

An HR Audit Can Help You Avoid Discrimination Issues

The best way to avoid discrimination issues in the workplace is to make sure you’re compliant. Our HR audits will show you where your organization is vulnerable to accusations or discrimination, and we will help you remedy the situation with modern policies, procedures and practices, including how to properly react to complaints. Beyond being compliant, we can help you create a more productive workplace as well. Contact us today!

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