The Compensation Question: Is salary discussion protocol evolving?

Employment professionals across the country have engaged in a new debate in reaction to laws passed by the State of Massachusetts and the City of Philadelphia, which prohibit employers from asking job applicants to disclose past salary information. The shared objective of the new laws is to put an end to a practice that is suspected to perpetuate the gender wage gap. While we, and our clients, are not currently beholden to the new laws, we find ourselves at the heart of the debate and want to take a moment to share our take as it relates to executive search.

Until recently, probing applicants for salary history has been a common-sense practice for recruiting teams. Companies and agencies ask, and sometimes require, five to ten years of salary information to be included on a job application, and recruiters of all levels would be remiss to pass up any opportunity to gather similar information.

But we’ve been following skeptics like Katie Donovan, founder of Equal Pay Negotiations in Medford, Massachusetts, who worry that the numbers provided are doing more harm than good. She challenges: “When employers force people who have been underpaid in the past to disclose their previous salaries to help determine their next one, prior discrimination is perpetuated into future bias – which in turn, inhibits career growth.” Considering the increasing public attention surrounding the effects of implicit bias, this issue comes as no surprise.

While Roy Notowitz, Noto Group President & Founder, doesn’t take the issue lightly, he holds a different opinion for executive level salary negotiation. “We anticipate that these laws will have an impact in the competitive landscape of emerging [entry, mid, and senior level] talent. However, the salary negotiation process for executive-level talent is a whole different ballgame. Compensation is a highly variable equation depending on the company size, ownership structure, growth trajectory, and equity incentives. At the executive level, companies need to put their best foot forward in order to land a proven executive. The base salary vs. variable pay is tailored to both the comfort level of the owners’ and candidates’ needs. For example, an executive moving from a large company to a smaller company may expect lower cash compensation and more performance bonus and equity.”

“I think it’s a very good thing for people to be thinking about pay equity in this way, because it indicates a shift in mindset.”
– Roy Notowitz, Noto Group Founder and President

The new laws will make it impossible for employers to ask for current or past salary information, but hiring teams will still be able to remain in compliance by framing the question in terms of salary expectations. When asked to comment on this nuance, Roy shared that, “No matter how you ask it, I’m afraid this may not affect the right change at the executive level in regards to the gender pay gap.” His prediction is that companies may be more apt to start by making lower offers to candidates in the beginning of the negotiation, which may only serve to prolong or derail the negotiation.

Gathering compensation information from candidates is a useful tool for understanding the marketplace as a whole, beyond the individual being considered for the position.

Noto Group is focused on making sure placements are the very best fit from a competency and cultural perspective, satisfying the needs of both the client and the candidate.

Whether the laws themselves will yield progress in eliminating the gender wage gap remains to be seen, and even though Noto Group will not likely need to amend any processes in the near future, Roy emphasized, “I think it’s a very good thing for people to be thinking about pay equity in this way, because it indicates a shift in mindset.” To solve any problem, he stressed, “raising awareness is a good first step.”

NOTE: The content of this article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.