The Biden Administration Is Weighing a Salary History Ban. Why Entrepreneurs Might Follow Suit

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Making a person’s salary history a no-go zone can have a positive effect on the workplace–not to mention your future employee’s wellbeing.

The Biden administration wants to do away with salary history in the federal hiring process as the government works to become a model employer.

The U.S. Office of Personnel Management proposed a set of regulations last week that look to bar federal employers from asking prospective candidates about salary history. A couple dozen states already ban the use of salary history in employment decisions to stem gender and racial wage gaps within the workplace. Wage gaps may be more marked for women or people of color as a result of systemic racism and historic gender barriers.

“Setting pay based on an individual’s salary history may maintain or exacerbate pay inequity a job candidate experienced in their current or previous employment,” the proposed regulation reads. It then points out how men continue to outearn women on average and acknowledges the presence of wage disparity among different ethnic groups. As of 2022, women above the age of 16 make 82 cents on the dollar compared to men, a March study from Pew Research Center finds.

The proposed regulations are part of the administration’s efforts to advance pay equity and be a model employer for the rest of the United States. The federal government is the nation’s largest employer within the country. While it’s hard to get a firm count on exactly how many employees the government employs in total, a 2017 study called “The True Size of Government” pinpoints government employment between seven to nine million people.

Still, in states where no salary ban exists, employers may still ask job candidates to share their salary history or what they’re earning in their current role during the interview process. Depending on your state, employers found to be in violation of any law related to salary bans may be on the hook for fines and mandatory training.

Ultimately, employers may save in compensation if they’re able to utilize a person’s salary history when setting pay, but the practice is shortsighted, says Dan Pyne, a co-chair of Hopkins & Carley’s employment and labor law practice. Nothing is stopping an employee from leaving for a rival employer willing to pay a more competitive wage. And it’s not cheap to hire and train new employees.

So what should you do instead? Pyne and other HR experts recommend asking an employee’s desired salary range and if it comes in above budget, asking the candidate if she or he is flexible.

Companies looking to advance pay parity within their own organizations should also conduct periodic compensation reviews, in which they look at workers in similar job functions and ensure that they’re paid at the same level.

The proposal arrives as states across the U.S. implement their own laws to improve pay parity. States including New York, for example, have introduced so-called salary transparency laws that require employers to post salary ranges for new job listings.