There is a topic that has sparked much debate recently. Can a company use a candidate’s salary history to determine their pay rates? Some people firmly believe that past compensation should have little to do with the pay for a new job, while others feel like it’s the ultimate deciding factor.
Recent cases in U.S. courts of appeals have been split with new rulings contradicting past rulings, which may take the concept all the way to the Supreme Court. Earlier rulings determining that the use of previous salary to determine pay rates would “perpetuate a discriminatory wage disparity between men and women.” As expected, businesses are split on whether or not this should be a common business practice. So what should you do?
Establish Your Policies Up Front
Whether you decide this is how you want to handle your salary negotiations for your business or not, make sure that you have previously established policies on record. When you make this determination on the fly, it can easily lead to discriminatory issues and hiring practices even if you don’t intend for them to be.
Determine the Rate of Pay for the Job
Ultimately, you already have a budget in mind for this role. You should also be able to find the median salaries using free online tools, such as Salary.com. This will help you have an idea of what a position should pay without relying on what candidates are indicating their salary history was with previous employers.
Base Pay on Merit Rather than History
The idea of basing salary on prior history can be a double edged sword. If you hire someone who was making significantly less in a previous position, you may feel as though you got a deal on their talent. But as soon as this employee learns they’re not earning a similar rate as their peers, the can become disgruntled. Instead, base pay on their talent rather than what they’ve made in the past.
Use Caution If You’re In Doubt
If you are in doubt about how to handle this policy, proceed with caution. It may be better to avoid discussions about past pay rates.
If you are in doubt about how to handle this policy, proceed with caution. It may be better to avoid discussions about past pay all together and simply make offers based on talent, budget, and the market averages in your city. This will prove itself to be a fair and even strategy when you’re not sure what you should do when hiring new talent.
Do you have more questions about salaries and establishing pay rates for your positions? Contact the team at Harvard Resource Solutions today.