The Salary History Dilemma

I’ve always been a fan of working in a productive team where I can comfortably collaborate with others. When selecting individuals to work alongside me, I prefer asking questions that can provide me with the most information about them. On one occasion, I had to interview several candidates for a marketing manager position and wanted to know if the salary I was offering was competitive, so I asked a few of them how much they had earned in their previous jobs. Full transparency here, the mentioned amount was so much lower than what I was expecting to hear, that I even got excited. “It is not possible,” I thought. “I did proper market research, I know what other companies are offering, I’ve seen job openings with open salary information, I’m pretty sure what I am offering is a fair price.” And then I figured there are so many variables that could be playing a part here. 

First, the candidates were paid that amount some years ago and the market has evolved ever since; their roles have gained relevance within tech companies, for example; there’s also inflation; they gained seniority; or the industry where they were working is completely different and serves a different purpose. Secondly, it's possible that some candidates received less salary in previous jobs due to discrimination based on gender, origin or identity. 

So engaging in this practice is absolutely unethical. Are you shocked? Well, basically what we would be doing by asking this innocent question is limiting career opportunities, perpetuating wage discrimination, and evaluating people based on their previous salary rather than their skills and experience. 

Sadly, requesting salary history is a bad practice that many companies have engaged in, and in some countries, it is even illegal to ask this question. Since May 2018, some states and cities in the US have banned employers from asking candidates about their salary history. In Mexico, the Senate launched an initiative in 2021 to reform federal employment laws to ensure wage equality between men and women. The bill identified requesting salary history during the hiring process or employment relationship as labor violence. We are still waiting for implementation and enforcement. 

In the meantime, as employers, it’s important to reflect on why we can't base salary offers on what a person has earned in the past, and we must reflect on the policies and procedures we handle internally. There are different measures that we and many other companies have taken, which have helped us reduce or eliminate wage inequality; some of these measures include defining salary ranges, conducting objective evaluations and providing salary transparency.

Defined Salary Ranges 

Ranges allow companies to maintain a consistent and equitable salary structure while providing flexibility to adapt to any market or company changes. But the real benefit is that these ranges can consider broader spectrums of the experience, skills, knowledge, and responsibility required for each position. By establishing salary ranges, companies can also better plan their budget and control labor costs, as they will have a clear idea of how much they should pay for each position. In addition, a clearer compensation structure will allow companies to attract and retain the best talent in their sector, as employees can compare their salaries with those in the labor market. 

Conducting Objective Evaluations 

The most important action we can take toward fair compensation without discrimination is having our own strong and objective evaluation. What does that mean? It means basing our salary definitions on factors like job complexity and requirements. Standardizing the hiring process can also reduce the influence of biases and unconscious biases in human resources decision-making. An example of this standardization is the use of psychometric tests, technical exams, or case studies. Companies should clearly define the evaluation criteria to be used, which must be related to the required skills, knowledge, and experience for the position. 

Providing Salary Transparency 

Salary transparency is essential to ensure that employees are compensated fairly and equitably, which in turn contributes to increasing their productivity and efficiency. This process can start from the recruitment and selection process, where it is important to discuss the details of the salary offer and benefits provided. This allows job applicants to know what to expect and what is expected of them in terms of compensation, thereby avoiding wage inequality and discrimination. Even within the company, employees will feel valued and rewarded if they have some clear visibility into the company’s compensation structure, making it more likely for them to stay in the company. An effective way to promote salary transparency is to issue a salary scale report, on the company’s website or sent by email to all employees, with different positions and levels of experience, so that everyone can detect potential wage disparities. 

In Mexico, it is not illegal to ask for salary history, and this can lead us to the dilemma of whether or not to ask about previous salary in our recruitment processes. I believe that by continuing to ask this question, companies may face a poor reputation and damage their public image, as it may be perceived as an organization that discriminates.

The salary question has long been a part of the hiring process, but it is time for companies to recognize the ethical concerns it raises. Those who have always been underpaid, will never be given an opportunity to grow if this innocent perpetuation doesn’t end. By doing so, we can work toward a more equitable and just society, one where everyone is paid fairly for their work, regardless of their gender, race, or background.