At Life Is Good, the Boston-based apparel company, asking candidates about their prior salaries was a crucial part of the hiring process, especially for senior positions. When the company hired a president about a year ago, "we relied on candidate salary expectations to educate us about the market, particularly incentive structures," says co-founder Bert Jacobs. "The conversations were informative and helped us shape our compensation strategy for the role."
But that source of strategic info was threatened in August 2016, when Massachusetts became the first state to bar employers from asking job applicants about their previous salaries, because basing a new salary on a prior one perpetuates wage gaps between white men and everyone else. Since then, Delaware, Oregon, Puerto Rico, New York City, Philadelphia, and San Francisco have approved similar laws. "It's a hidden form of discrimination--employers may think it is reasonable to ask and may not understand the discriminatory effect," said D.C. congresswoman Eleanor Holmes Norton, who is co-sponsoring a bill to ban the prior-salary question nationwide. At least three other states are considering similar laws as well.
The Massachusetts law goes into effect in 2018, but Life Is Good has already forbidden hiring managers from asking about salaries. The company now bases starting salary offers on external job market data. Even if your state doesn't have the restriction, you may be affected if you hire staff in states that do. These founders have learned to make smart salary offers while following the rules.
Working in a Data Mine
Miriam Altman, co-founder of Kinvolved, a New York City-based educational software and consulting company, is using the vast amount of surprisingly specific salary data that's available for free to benchmark her salary offers. She points to the AngelList website's free tool, which has information on pay rates by job role and location. She also uses Glassdoor.com, a free crowdsourced database for job-market data. Finally, she collects anecdotal information at regularly scheduled meetings with a peer group of CEOs in her industry. The process helped her confidently make successful offers to a digital-content coordinator and an impact-assessment coordinator. It also revealed to her that "we were overpaying for certain positions," she says. For companies with more resources, PayScale, an online service, conducts ongoing salary surveys of job seekers and verifies its results. Its localized salary data is available via subscription.
Hire From Within
Dennis Hoover, co-founder of the Organic Coup, a San Francisco-based fast food chain, has found that the easiest way to manage salary-discussion restrictions is by promoting primarily from within. Hoover knows what he's paying his existing staff, and hiring internally means retention rates are higher and "you don't have to deal with a lot of bad habits that people bring from other companies," he says. As Hoover adds new locations, he plans to hire entry-level workers at just-above-market rates, and to train existing hourly workers to move into management. He'll also relocate some to work in the new branches. The benefits of this strategy--keeping loyal employees while avoiding salary negotiations--will outweigh training and relocating costs, Hoover says.
Watch Your Language
While the law says hiring managers can't initiate conversations about prior salary, if candidates offer that information, it's fair game, says James Reidy, a lawyer at Sheehan, Phinney, Bass & Green in Manchester, New Hampshire. (He advises many companies affected by the salary-discussion bans.) "Once they disclose it, you can ask about it," he says. Employers should make sure that they have trained their interviewers to avoid overtly "asking for the information, or prodding in any way," says Jason Habinsky, a partner at law firm Haynes and Boone in New York City. It's also vital that HR departments amend their employment applications to remove any prior-salary questions if the application is used in a location affected by a ban.
Mind the Gap
These companies go to extreme lengths to achieve equal pay for equal work.
- Salesforce.com In 2015, the San Francisco-based CRM company analyzed its payroll and then spent $3 million to close the pay gap it found. This year, it spent another $3 million topping up salaries when another audit showed that the gap had returned. "It's a moving target," wrote EVP Cindy Robbins at the time. "It must be consistently monitored and addressed."
- Buffer The social media management platform, based in San Francisco, posts a list of its salaries, as well as the formula it uses to determine them. The transparency has helped the company get closer to a near-zero wage gap for those in similar roles, says spokesperson Hailley Griffis, and company-wide, the gap between male and female employees is now $2,400 per year, down from the $9,500 found in the first salary audit. "We still have more work to do to get to zero," says Griffis.
- Skillshare This online learning company in New York City ended salary negotiations in April 2017 after a review found that good negotiators were making up to $10,000 per year more than others with similar jobs, says COO Matt Cooper. Today, "take it or leave it" offers are based on a simple grid that assigns salary according to job type and skill level. Cooper says the new policy has helped the company achieve gender wage parity and hasn't hurt its hiring spree--the 50-employee company has added 15 staffers since it was adopted.