Earlier this year, Governor David Ige signed a bill into law which prohibits employers from asking job applicants about their salary history. Hawaii’s Equal Pay Act, also known as the Salary Ban Law, takes effect on January 1, 2019.
So what do you need to know?
While it’s true these changes mean many businesses will have to look at their hiring practices and potentially make changes to their application process and training, the new law also offers an opportunity for employers to modernize their business practices by creating a formal compensation philosophy or strategy.
Ultimately, getting your hiring process and compensation strategy up to date will help you attract quality employees — and retain them for the long haul.
What It Means
Under the new law, you can’t ask applicants what they earned at their last job, or anything else about their salary history. You also can’t use what you know about their past salary to determine their pay, benefits, or other compensation during the hiring process.
What’s more, employees have the right to discuss their wages or ask about what others earn, and you can’t punish them for discussing salaries amongst themselves.
Why Not Ask?
So why not just ask? The purpose of the law is to end the cycle of pay discrimination. Even today, women in Hawaii earn 84 cents for every dollar earned by men. When an employee’s salary is based on what they earned in previous jobs, unequal pay can be perpetuated years into the future for women and minorities.
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And Hawaii’s not alone in taking on this issue. Eleven other states, including but not limited to California, Oregon, New Jersey, and New York, have passed salary history bans, along with cities like Chicago, New Orleans, and San Francisco.
What You Can Do
First of all, let’s talk about what you’re still allowed to do under the new law. If a job applicant brings up their previous salary — voluntarily and without prompting — it’s OK to take that information into consideration but it shouldn’t be the sole basis.
You can also ask an applicant about their expectations around pay. While re-framing the question in this way is still legal, it’s a sticky question that you’ll probably want to avoid. Instead, you can discuss objective measures of the applicant’s productivity, like revenue, sales, or production reports, or criteria like experience, education, and skills.
Finally, if you conduct a background check to confirm other details of their application, and it happens to turn up information about their previous salary, you haven’t broken the law — as long as you don’t then use that information as the basis for their new compensation package.
How to Stay Compliant
If part of your hiring process includes asking about salary history or current pay rates, you will need to make some changes.
Here are two things you can do right now:
🗹 1. Start by updating all of your application materials — both paper and electronic — and remove any references to salary history. If you’re a ProService client, we’ve already done this for you!
🗹 2. Next, take a look at everyone in your organization who’s involved in the recruitment and hiring process, and make sure they’re trained on the new requirements. (Share this post with them or check out our free, on-demand webinar to learn more.)
Additionally, it’s worth noting that the new law includes reference checks and background research, so staff should know not to do an internet or public document search for prior salary history, for example.
Build a Better Process
Obviously, pay is a huge part of the hiring discussion, and employers need some way to make reasonable salary offers. The good news is, there are alternative and better ways to do that than to ask about an applicant’s salary history.
Think of this as an opportunity to develop a compensation strategy for your company, or to improve your existing strategy, if you already have one. Consider objective criteria like experience, education, and skills, and then use that to create a salary or pay range for a job.
Compare and Contrast
It can also be useful to look at what other companies are paying for similar jobs. One tool we use at ProService Hawaii is Payscale, a service that gives us access to the world’s largest database of salaries.
Tools like Payscale can be used to generate reports showing employers the market value for a job they’re trying to fill, and they can be customized based on experience, education, and other criteria.
And since the reports look at a broad range of salaries, and not the salary history of an individual candidate, they’re perfectly legal under the new law. Once you determine your compensation criteria, you’re free to inform the job applicant about the proposed salary or salary range for the position.
As you take another look at your compensation philosophy and strategy, it’s good to remember why you’re doing it. By law, pay practices are supposed to be consistent, non-discriminatory, and not arbitrary. The whole purpose of the salary history ban is to end pay discrimination and to prevent past inequality from being perpetuated into the future.
By following best practices and basing your compensation on objective measures, you’re making your hiring process more fair and transparent, eliminating uncertainty, and building trust for both yourself and your employees.
Let Us Help!
As an employer, running a business means adhering to federal, state, and local employment regulations. The list is so long it’s actually quite hard to keep track of what you have to do to stay compliant.
So whether it’s Hawaii’s new salary history ban or the State’s Paid Family Leave Bill (SB-2990) that’s undergoing analysis to determine its impact — let an HR partner like us help you navigate Hawaii’s highly regulated environment. Schedule a free HR consultation to learn how our HR services can power (and protect) your business.