The Impact of One Question

Money. Money. Money.

It’s that one word which always has a ripple effect.

Is it tacky to talk about money? Nah. When it’s about gender pay gaps best to get comfortable with the uncomfortable questions of pay equity.

I can most assuredly tell you there is a science to determining pay. I’ve learnt from compensation experts that salary is calculated by a mix of skill sets, experience, title, level, location and industry. “Total compensation” is when base salary is combined with the value of any and all financial benefits provided by the employer.

Thus, determining a starting salary has nothing to do with either one’s salary history nor one’s current pay.

So why do (almost all) organizations still ask this question?

It’s one loaded with bias.

Companies now invest over US$8 billion annually in diversity training. US$ 8 billion, no doubt delivered with the best intentions to create an inclusive workplace. Typically the training, a mix of lectures and discussions, focuses on building awareness how bias impacts decision making.

The one missing element from bias training is the most elemental; Pay Equity, and how salaries are determined. Consciously or unconsciously, hiring managers and HR have an ‘’anchoring bias’’, an over reliance on a candidate’s prior salary to determine a starting salary, which almost always leaves little room to negotiate.

Last week alone, two clients sought my advice on this very topic. One has extensive experience working for a global NGO, and is being recruited for a private sector role. The other has worked for an association for over five years and is now exploring opportunities with an online retailer.

At the outset, both were first questioned on salary history and asked to provide pay slips as proof. (And hello, who receives pay slips anymore?). This makes zero sense, as the salary range for the private sector is completely different than that of an NGO or an association.

Bias and the persistent gender pay gap is why nineteen States in the US previously banned any questions on salary history.

So have parts of Canada, UK, Australia, and Germany, France, Spain and Ireland have recently introduced ‘pay transparency’ legislation. In Asia Pacific Region, however, few countries except Singapore have reconciled this issue. The former Minister for Manpower, Josephine Teo, was quoted as saying “There are no rules stating that job seekers must declare their last-drawn salaries, and employers cannot insist they do so.” Ms. Teo suggested adopting a more “practical approach.” “It is similarly unwise for employers to overlook the longer track record of the applicant, and make an offer based solely on the last-drawn salary especially if the last-held position was an interim one.”

When I do bias training, I recommend removing every question on current pay or salary history so that the recruitment process is more inclusive. You’d think a simple but critical fix could be easily implemented.

Easier said than done.

Do you think that pay gap would have greater parity if organizations refrained from asking about salary history?

Research says — yes.

According to James Bessen, Erich Deck and Chen Meng “If employers can access applicants’ salary histories while bargaining over wages, they can take advantage of past inequities, perpetuating inequality.” As organizations move towards equity specifically acknowledging an unequal starting place and makes a commitment to address the imbalance, then they must start with conversations around pay.

Here’s what we (and researchers) have uncovered when companies asks about current salary:

1) Employers who conduct internal pay equity audits found salary history to be a key driver of gender wage gaps within their workforce.

2) Asking about salary history is not a one-off. The question is harnessed across a career, impacting raises, bonuses, perks and retirement savings. Data from Visier Research highlights that “The gender wage gap widens at age 32, starting with women earning 90% the wages of men, and decreasing to women earning 82% the wages of men by age 40.”

3) Flawed assumptions and biased decisions on salary and the relationship to worker value and market value (NGO vs private sector salary range)

To break the cycle of pay discrepancies, not only States, but even some CEO’s have pledged to limit or eliminate the use of salary history. So, why then do Talent Acquisition teams or corporate websites still require this information?

It’s not only outdated, it’s a humiliating experience. (And, if you’re thinking about the candidate experience, this one question — kills it!)

There are simple and effective fixes which can easily be put into place so that the Money Money Money question is managed more professionally and more evenly. That’s the future of pay equity, which needs to be addressed and resolved more than it currently is.