Engage Podcast: What Does New Legislation Around Pay Mean for Employers?

5-min read

This episode of the Engage podcast covers new legislation around using pay history to determine an employee’s salary. 

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Kellie Onaga (KO): Your company may be feeling the impact of the salary history ban. States and cities across the U.S. are passing legislation, banning employers from asking job applicants that familiar question, “What was your salary at your last job?” In the past, candidates’ responses have given employers the upper hand in the hiring process. The salary history ban is meant to level the playing field by preventing any unfair pay practices and encouraging pay transparency.

Those are the topics we’ll take up in this episode. This is the Engage Podcast. I’m your host Kellie Onaga, a writer at GuideSpark. Today we welcome Julianne Harrison, a GuideSpark senior product manager. Julianne has worked with the human resources teams of numerous organizations, helping them communicate their compensation programs to their employees. We’re also joined by GuideSpark Writer John Bonoff, who’s here to ask Julianne some questions about this topic.

John Bonoff (JB): Julianne, thank you so much for sitting down with us today and letting us pick your brain. Like Kellie mentioned, companies across the country are adjusting to the salary history ban right now, and, depending on their location and industry, they are doing it in different ways. In your experience speaking with HR leaders, what do you recognize as the common challenges companies face in adopting the law?

Julianne Harrison (JH): I think the first challenge is getting your arms around that status quo and figuring out how the law impacts your business. For large enterprise companies, they may have multiple locations, and the law may be impacting those locations differently. Also, they need to audit their existing hiring manager resources and really figure out what needs to change to stay compliant.

I think the next challenge is figuring out what’s next and starting to think about how they might want to adapt HR processes and programs and manager behaviors. The hiring process really sets the tone for the culture of a company and how it values things like fairness, equality, transparency. So, this is where I think a lot of HR leaders are starting to shift their attention to and start thinking longer term about those kind of broader categories and then how they also want to tie that to the business or business-level objectives for things like culture and values.

(JB): And then the flip side of that question is given these challenges you’re talking about, what can companies and, specifically, HR leaders do to make this adjustment smoother?

(JH): First, HR can help managers understand the “why.” If we focus just on the “what” and the “how” of this new legislation, it’s a missed opportunity to help educate managers on the company’s approach to pay programs and how that’s actually aligned with this new legislation. Focusing on the “why” also helps HR get more leverage out of change management. If our only action is to simply remove the salary history question from the hiring process, we’re not going to see transformation and the change that this law is really hoping to achieve in pay equity.

Additionally, a lot of the companies I’m talking to are using this as an opportunity to turn more to external market data here. Instead of relying on a candidate for this information and asking them, you know, how their previous employers valued their skillset, their experience, let’s let the data tell us how to pay our roles and not let candidates influence this so strongly.

(JB): So, one of the main functions of the Salary History Ban is to alleviate pay discrimination, but you are describing it as a symptom of a larger change or set of changes that are already taking place. What are those changes, if you could just sum them up, and how do you see them rolling out in the future?

(JH): Yeah, so I do think this is just the tip of the iceberg. You can see that this is a step in the right direction towards more fair, transparent, and equitable pay practices, but this law alone, or this set of laws alone, isn’t going to close the gender pay gap or the biases that exist in the hiring process.

Beyond that, I think this law is starting to hint at something bigger, and that goes beyond just compensation. So, whether your company is undergoing a change in the way they administer processes, perhaps an HRIS system rollout or a consolidation of systems and tools, those processes and how they support the business is starting to change and really start to think about how they actually hint at the ethos of the company.

Every HR team I’m talking to is starting to evaluate not just doing the right thing to stay compliant, but to start to do this and take a stand for a competitive advantage. So, whether they’re formalizing a pay structure, moving away from ratings and rankings, or really focusing on manager accountability, we’re starting to use this set of data and information that’s out there and the soft skills of the managers and really connect those two things to really fuel the business and the growth and hire the right people.

And, for me, all of this, there’s a lot of change happening, it really comes down to communication, and the companies that are managing through this complex time well are those that are using it as a critical touchpoint to tie the HR activities to the business and the impact it can have and really the character of that business.

(JB): And so, obviously, it’s important for each organization to understand their own unique challenges to not just the law, but these bigger issues. What are some questions HR leaders can ask themselves to better diagnose how they can optimize in these areas?

(JH): Yeah, I think HR can really start by asking themselves how well managers can articulate the company’s pay philosophy, and that might sound a bit odd since we’ve been talking about, you know, salary history questions and making sure the hiring process is compliant, but I think that this legislation is really about building more fairness in the workplace – that’s the umbrella.

So, if the company’s approach is also about fairness, paying for performance and impact, those two things should feel aligned to this new legislation. And everything that the company does to pay its people should really be reinforcing that legislation’s underlying goal. So, if the manager can’t speak to the company’s pay approach and the philosophy, they probably aren’t in the best position to make the right hiring decisions and have that conversation with a candidate either.

And, next, I would say they should kind of grade themselves on their managers’ readiness and effectiveness to have difficult discussions, not just about salary histories, but what the company is willing to pay a candidate, maybe even related to performance management or career development opportunities. Managers need a consistent, engaging training experience to really equip them to be on the frontlines and be an evangelist for the company’s approach to all of these HR programs, so it’s a good time to kind of assess how ready your managers are and maybe where is that room for improvement.

(KO): Julianne, we really appreciate your time and insight into these larger, more complex topics. What are one or two things HR leaders can do today to take action?

(JH): First, HR should come up with a multi-format, engaging, on-demand strategy to communicate with leaders. Not all people need the same information or need it at the same time. Think through how you’re going to get the message out, and keep it relevant.

And, second, get the data in the hands of managers. Even if your organization isn’t fully transparent, think about ways to equip managers with more data, so they can feel confident having these pay conversations with candidates.

Host/Writer/Producer: Kellie Onaga
Interviewer/Producer: John Bonoff
Editor/Producer: Sarah Kyo
Producer: Caitlin Gibson
Composer: Lee Rosevere (License)