The Impact of the Law Banning Salary History Discussion

On October 31, 2017, NYC banned employers from asking candidates their compensation history. Their goal was to address a discriminatory practice.

Recently, I spoke with an industry source who had heard that employers were telling candidates, “Here’s your offer, take it or leave.” He shared that his understanding was the discussion around compensation had been truncated.

When I shared with this source a few anecdotes I had heard, he was surprised.

I’m now aware of four offers made that wouldn’t ever have been presented before the law. Two were for offers that included a 50% increase in base salary while two others were 50% higher in total compensation.

My guess is that neither the hiring managers, nor the recruiter, nor Human Resources had a sense of what the candidates were earning. Otherwise, I think it’s unlikely they would have made offers with such radical increases. What you may find especially unexpected is that not all of these offers were accepted. And three were made to male candidates. This is noteworthy as the law was specifically geared to assisting women and minorities.

In one case, where the offer was declined, the candidate accepted a counter that didn’t match the significant offer. Compensation, he explained to his boss, was the only reason he was interviewing. And when the candidate said that to his boss, she didn’t know his base salary and was surprised to learn it was so low. Yes, the boss didn’t know her subordinate’s base salary.

What are hiring managers to do? Certainly they don’t want to break the law and ask what a candidate is earning. Nor do they want to offer a 50% increase in salary or total compensation. One approach some will surely take is to do due diligence. Find out what is known historically about how people are paid. For example, at certain firms, titles determine what compensation range someone might be eligible for.

But far more important, evaluate the compensation of your existing team and determine what you’re comfortable paying for the role. This approach can mean that you may not consider some talented candidates. Yet, it could help to keep the compensation packages of the entire team in the same range.

Sometimes, when interviewing, hiring managers quickly learn that their existing team is paid below market. This may prompt them to adjust the compensation of current employees. Others prefer to just keep searching for a candidate who, similarly, is paid below market.

Compensation is not the only reason anyone should move. But it’s almost always one of the reasons. Hiring managers who offer reasonable compensation packages and make an effort to meet the requests of a candidate, while still be respectful of what existing team members earn, will likely be successful when it comes to recruiting.

Above all, if a candidate feels good about their compensation, the firm that hires them will likely benefit. First, the new hire is more inclined to stay longer. Second, they’re less likely to waste lots of time trying to determine if they’re reasonably paid. Third, if they feel good about their compensation, they’ll probably want to make a better contribution and do a better job. That’s certainly good for the hiring manager.