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The Salary History Ban: Market Intelligence Key to Competitive Wage Rates

people with papers in hand
A growing number of jurisdictions are instituting Salary History Inquiry (SHI) bans that prohibit companies from asking about a job candidate's pay history. For employers, this can represent a disruption in the way they’ve recruited for years or even decades. How can they determine what to pay a new employee in the absence of prior salary knowledge?

According to Christel Mendez, Aerotek lead account recruiting manager, removing that critical piece of information compels a need for the talent acquisition process to rely more heavily on other knowledge to calculate appropriate compensation, including a comprehensive description of the open position’s requirements and how it relates to a candidate’s qualifications, as well as industry insight and market data.

“There are so many factors that go into determining compensation,” notes Mendez. “How much experience is needed to accomplish the responsibilities of the role? Will this employee be managing others? Are there specific areas of expertise that are required?”

The new SHI rules come at a particularly challenging time for employers, who are already facing a historically tight talent market. “More than ever, employers are seeing the need to stay competitive with their offers, or risk losing their top candidates to other opportunities,” she notes.

At the same time, she says, employers need to quantify the return on investment (ROI) for the wages they pay, even in a competitive hiring market. “Third-party data such as local market analyses, per capita density reports, market-rate wage data and regional competitors’ pay scales can help employers make the most informed decisions.” And, she notes, to help hiring managers who may need to make a business case to their C-suite executives.

“Employers who have a positive brand or employee value proposition (EVP) have an edge in hiring. Conversely, companies that are lesser-known may find they need to make offers that are attractive in other ways, such as an appealing benefits package and office perks.”

Mendez advises flexibility. “Even the most attractive candidates can limit their options with inflexible salary requirements. I’ve sometimes had to say to job seekers – ‘I haven’t come across any examples of companies in the market offering that salary available for a similar level of qualifications’ in order to explain market realities.”

Similarly, companies with a flexible salary range have a higher chance of securing their top choices.

As the economy continues to boom, companies are increasingly adopting a strategic approach to determining compensation packages that reflect the realities of today’s hiring market. This is even more relevant for the jurisdictions legislating salary history inquiries.

“If you want to win your top candidate,” advises Mendez, “I recommend you make your best offer – based on the candidate’s qualifications and the job’s responsibilities. If a candidate feels your offer doesn’t reflect their worth, it can create a hesitation that ultimately costs you your preferred hire.”

Want to learn more about salary history bans and how to make winning offers? Contact Aerotek now.

This is part two of a two-part series on salary history bans. Access part one here.