“Equal pay for equal work” is the typical catchphrase of the Salary Equality issue, which was prominent at both major political party conventions last month. Hillary Clinton has been talking about the gender salary gap all along, and Ivanka Trump spent some time on it in her speech before introducing Donald Trump (who did not mention it).
It has often been quoted that the typical woman earns 79% of a typical man’s salary. (In Massachusetts the number is 82%.) These numbers have been sliced and diced, but that’s a topic for another time.
On Monday, August 1, 2016, Chapter 177 of the Acts of 2016 was signed into law. Though it does not take effect until August 1, 2018, the new law states that employers can no longer make job offers based on past salary data. The more accurate catchphrase for the law should be “Equal pay for comparable work.” The law defines “Comparable work” as work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions. So how does this affect MA businesses?
This is not just a woman’s issue. I believe it applies to all races and genders – white males as well. I believe I was impacted by this issue in my second job out of college. I would word the popular catchphrase slightly differently: I believe that “comparable pay for comparable results” is good for every gender and every nationality.
Employers who hire recent college graduates typically use a formula to determine starting salaries. These formulas calculate a job offer by weighing the quality of the school and the candidate’s GPA. If a potential employee attended a lower ranked college and did not achieve a high GPA, he or she could start at a lower salary than his or her peers.
I went to a state school and had a “well-rounded experience.” While my GPA could have been higher, my first employer valued my real-world work experience and my practical approach to problem solving. I remember finding out that I was paid less than my peers, and I still hadn’t caught up by the time I went to my second employer after almost 5 years. My job offer there had been based on my previous salary. What compounded the issue was that my stock options were based on a multiple of my new salary. It turns out that the impact of fewer options at a successful startup had a major financial impact.
I have always believed in pay-for-performance, and I advise my clients to think this way. People who perform similarly should be paid similarly. For many companies, it is the results that matter.
When hiring, how do you determine what to offer if you don’t know what the person is currently earning? The simple answer is this: How much is the person worth to the company compared to others doing a similar job? The more complicated issue is determining if the person will perform as expected. This is where the Perfect Hire Blueprint (PHB) process becomes even more valuable. The system removes unintended bias and uses data – more than the interviewers gut feeling.
An employer cannot screen applicants based on their salary history. What I recommend is that you ask for the candidate’s salary requirements. Walter Foster, an employment and litigation attorney at Eckert Seamans in Boston says such an approach avoids some of the laws’ pitfalls. “The law prohibits an employer from requiring a candidate to disclose her salary history as a condition for an interview or consideration of an offer of employment,” says Foster.
As I mentioned in the PHB eBook, you should know if the candidate will accept the offer before you offer it. The best way to know that is to ask what is needed for the person to accept an offer from your company. If the compensation is higher than expected, the law could allow words similar to, “We’d like to make you an offer, but we need to reach agreement on compensation. You are asking for X, but peers in the position are getting Y.” The reason that works is that salary was not a factor in deciding to make an offer.
The new law doesn’t change the process. The process will continue to work for you and will ensure your compliance with the new law – two years before it goes into effect.