The news spread pretty quickly in the recruiting circles yesterday that my home state, Massachusetts, just passed a bill that will ban employers from asking for salary history from prospective candidates. Confusion came over a lot of our industry, especially those from the Commonwealth, as most recruiters are taught from day one to do this very thing. Very early on in my career at an agency, this was literally recruiting and negotiation 101. If I ever dared submit any candidate to a hiring manager without salary history information I would be chastised and forced to go back to said candidate for the information before proceeding any further. I understood the logic behind this (how can we be competitive with compensation in an offer if we don’t know their current salary) but I also very early on in my career understood there was a power dynamic in place here too that had as much to do with “internal equity” and cost/salary savings than it did with the interests of the candidate. The spirit behind this new law is equal pay – and for that alone I applaud my home state in doing something, even if I feel something this absolute has it’s negatives too. Another part of the law no one is talking about, which I absolutely love, is no more secrecy of pay – in essence not allowing employers from keeping their employees from talking about pay with each other. While I never worked for a company that actually had policies around this, there was always an inherent understanding that this was more than frowned upon. If equal pay is the goal, I see this part of the law as a positive that is a natural evolution in a business world that is indeed making efforts to become more and more transparent every year. So what are my quick thoughts here?
- What does this mean for employers? I think this shifts the power in the candidate/employer relationship definitely towards the candidates. This is already a candidate driven market in my opinion, but the salary history question still allowed for negotiation leverage for the employer. As I mentioned earlier, a lot of recruiters have been taught from the beginning of their careers to ask this question for negotiation purposes, but I also know a lot of them never offer up salary range from the outset to the candidates either (before I get angry recruiter emails – I said “a lot” – not “all”). I do think, though, that this could lead to a lot more “wasted” recruiter/candidate interactions, because if you cannot talk salary up front you cannot get to what is a core “go/no go” issue from the outset. If your role is paying, say 70K and the candidate is earning 80K, and you could discuss this at the outset you both say thanks but no thanks and move on without wasting anyone’s time. Now, this conversation cannot happen (as I understand the law) which could lead to a lot of wasted time and bad candidate experience on both sides of the equation. Not to say this will happen, but it could. On the flip side, this will also give employers more than a nudge to have uniform pay grades to ensure equal pay – which is a good thing. This is common practice in larger companies, but I know from experience it is not the case in a lot of SMBs. This transparency on pay, both with new hires and existing employees can definitely have the desired effect on equal pay. With regards to high demand skill sets, like Software Engineers, it will force companies to be at market demand for pay or watch themselves lose out on highly coveted talent (both prospective and existing). A lot of companies still operate on “what the candidate is earning” to determine offers, and this will be bring some more uniformity for sure to the process. Still, I know a lot of recruiters work hard to be the true “agent” of their candidates, and without this information upfront their ability to do so is lessened a bit. Also – employers now need to get their house in order and hire some compensation folks stat – because this function just get a hell of a lot more crucial with a new law that allows for (and demands) transparency of pay among existing employees.
- What does this mean for agencies? This is not as clear cut as I think it may be with employers. I am not sure if this law covers agencies yet, but if it does this could definitely be something that will require a tougher transition period than it may for the in house recruiters. Today, this is a crucial part of their value add to the candidate and the company they are working with – as this is a key piece of information (among other valuable pieces they provide) that allows them to broker a deal favorable to both sides. Also, with this much salary transparency along with more and more companies hiring internal recruitment teams with savvy employment marketing campaigns to boot, it may behoove candidates to just take out the middle man and go straight to the company because without a “negotiator” need the need for a middle man becomes a little less important, NO – I am not saying agencies are dying or going away – I believe they will always play an important role in our industry. What I am saying is that there will definitely be a big adjustment that needs to be made if indeed this law does cover staffing agencies too.
- What does this mean for candidates? As I said above, this definitely tilts the power equation a bit more towards their side. Without having to disclose upfront salary history, they can benefit from being paid what “market” and the company itself deems their skills and experience are worth. What often happens today is the recruiter will get the salary info up front, and come back with an offer that is a “reasonable” increase (to be competitive) but that also doesn’t necessarily match internal equity or market pay. This is not always the case to be certain, but it happens a lot more than any of us in our world would care to admit. Now, someone who is making say, 80K as an accountant in their current company can get a significant “bump” if they are valued by another employer by internal pay grades without any upfront consideration of their current salary in the process but rather what the company itself pays for (and values) that position and level of experience. Likewise, it could also be less too, or even lateral pay – but now the offer power dynamic is more in the hands of the candidate and less so the employer. This will definitely force recruiters to truly be the agents they aspire to be for their candidate and REALLY understand them and their motivations beyond just pay. Those that do will stand to be more successful in this new dynamic.
- What if I am a Compensation person? Celebrate – because you just got a hell of a lot more sway and a ton more job opportunities.
Again – this is just a quick thought process of a law that was passed yesterday. What do you think? Let me know in your comments.