Last week the BBC published a rather topical piece titled “Should workers be asked what they earn?” The gist of it was that this was one of the root causes of trapping women on low pay when they sought out new employment. It resonated with me as it is a theme that I have been harping on about for some time now as one of the root causes for gender pay disparity and yet it doesn’t seem to have been really talked about or debated much in the UK. It was this concept in part that led me to take on an extensive piece of research around pay rise disparity across the HR profession and whether there is a “Pay rise gap” between men and women when making a job move (turns out in HR there is a huge issue waiting to bubble to the surface, that will be published in October in my research paper!) The point I am eventually getting round to making is that this article by the BBC for me is the start of something I can see eventually finding it’s way into government discussions and something I genuinely feel is the future of where pay discussions are heading in the UK.
When the US led the charge on this last year in NY and California I was one of the first to scoff at the concept. The idea that it was illegal for employers to ask about salary or request salary information prior to making offer seemed in line with publishing CEO pay ratio’s; something pointless, gimmicky, and wouldn’t deal with the underlying issues around pay disparity. The justification of this law change was to address the 20% gender pay gap across the United States and that it would help end the continuous cycle of low pay for women. However, I was horribly wrong. My opinion has changed on this and I would happily eat some humble pie if anyone had any going! The actual concept of banning employers from asking about salary information, in my opinion, is going to be the main weapon of choice to force employers to pay individuals what they are worth, and in line with market rate rather than simply paying someone a salary based on a percentage uplift.
It sounds quite dramatic but it’s worth considering the underlying issues that post-recession hiring has caused, and why perhaps these States decided to adopt this approach. NY being the US financial services hub and California operating as the emerging fin-tech and tech startup zone has seen well-documented talent shortages for the last decade. The US is enjoying unprecedented economic growth and hiring is on the agenda for many firms, creating the standard war for talent bla bla bla! Salaries increase in talent short markets and offering becomes a consistent battle of breaking internal salary bands, counter-offering where possible and being creative around packages. Candidates drive up their price point to be paid their perceived “market worth” and hence hiring budgets get blown out of the water. However, thinking commercially, this didn’t mean organisations were simply going to roll over and pay everyone at an over-inflated market rate! Talent acquisition teams and RPO’s are increasingly judged by metrics with cost per hire being one of the key performance indicators. Salaries are a firms biggest fixed cost, so there is constant pressure to control this where possible to keep within internal salary bands and avoid paying over the odds if you don’t have to. This fundamentally is where it all started to go wrong. Hiring in the US became about landing a “good deal” at the right price point wherever possible. Hiring became a business transaction rather than considering what is right and fair. Hiring became more about trying to secure someone on the lowest base salary possible rather than paying them what they are really worth. Talent war or not, using people’s prior salary and bonus history, firms were pushed to offer packages that offered percentage uplift on an individual’s current personal circumstances to land the best talent rather than getting involved in bidding wars. This is fine in certain situations, but that is supposing that an individual was fairly paid to begin with!
What if the candidate concerned was coming off the back of a second maternity leave having been with a firm 8 years and had only received pay increases in line with inflation over the last five years? Chances are the individual would probably be on a salary level well below market rate having not enjoyed the fruits of the hiring clamor of the past two years, so offering them a 40% increase will make up for that??? Well what if that 40% increase still leaves this individual below market rate and the lowest paid member of the team? Chances are they may never know and will gleefully accept said increase as a game-changing offer but in reality they remain underpaid for what they are worth. The hiring manager will be happy he landed a strong individual and the recruitment team will high five each other for securing a “good deal”, not knowing all the while they have perpetuated a cycle of underpayment. Now again this sounds dramatic but whose responsibility is it to try and pay this individual fairly? One could argue that the candidate should perhaps do more research around market worth but fundamentally it is surely the employer who has an obligation to address the issue head-on and pay someone at least in line with peers in the business?
For me this is the root of the issue which I feel lawmakers in the US failed to realise they were actually tackling. Stopping the salary question at interview does start to address the gender pay gap but I feel it goes much further than this. The concept of “fair pay” and ascertaining someone’s worth is the real problem that firms were trampling all over. Benchmarking your numbers with one of the usual consulting firms doesn’t really cut the mustard, as most firms use this a guide to negotiating someone’s salary expectations down rather than applying sweeping uplifts to catch up to market rate! For me the question of “worth” is the one where companies have a duty to get it right and this is something that firms in the UK should start thinking about.
How often would a prospective employer turn around and disagree with someone’s salary requirements if they thought they should be paid a lot more than they’re asking for? I would hedge my bets on most remaining tight-lipped and not saying anything! Someone’s worth is often based on their own assumptions from vague conversations with friends, family or looking at job ads online, all to gain a rough guess of how much you should receive for your next role. Yes, there are occasions when someone’s expectation is way out of kilter with reality and we often work with them to educate them on this fact but most of the time we are telling individuals that they are worth far more than they think. We have the fortune to be privy to this kind of information of what the market can really pay and with Oakleaf Partnership placing 604 HR professionals last financial year we have hard data on the pay increases people received when leaving their role. Recruitment firms naturally have a duty to educate their candidates and clients around market worth but whose duty is it to educate those who aren’t using an employment agency about their “real” value?
This is perhaps where banning the salary question is the best step forward to really address the perpetuation of low pay and why I think we should adopt the legislation in the UK in the coming years. Whilst it is drastic, it will ultimately force individuals to think far more about their market value and force employers to offer a salary based on market rate and someone’s true worth, rather than the dreaded percentage increase! Talent acquisition teams will argue that they are under pressure to maintain salary bands and reduce hiring costs where possible and that offering what is “fair” or doing the right thing is something no one is going to thank them for when salary costs go up. I would argue that surely the time for Reward and Talent teams to work more effectively together to offer the right package for the right candidate has never been greater. I am yet to deal with a firm that has point blank refused to ask for salary information about a candidate prior to offering and just asked for their requirements, thinking about that whilst writing this is something I find depressing and deeply troubling.
Gender Pay Gap reporting, Publishing CEO Pay Ratio’s and making shareholder votes binding on exec rem policy are all concepts that flirt with addressing the issue but for me, scrapping the salary question at interview would be a significant step forward. Maybe it’s time for an HR Director or a Reward Director to stand up and say moving forward at all interviews “Don’t mention the Salary!”