Bloomberg’s Workforce Strategies: How Much Is An Employee Worth?

By Kimberly KeatingInsightsComments are off

Determining how much an employee is worth and establishing compensation levels is a challenge most companies face.  The March 2017 issue of Bloomberg BNA’s Workforce Strategies, takes an in-depth look at how companies determine how much to pay their employees.  Kim Keating, Founder and CEO of Keating Advisors, is featured in the article, providing insight into how to balance an organization’s salary ranges and candidate’s salary history.

Prospective employers often wish to use an applicant’s salary history as part of the determination of what they will be paid if hired.  “The first person to give that information is at a disadvantage in a pay negotiation,” Keating stated, and she recommends that job applicants not divulge their current salary until they receive an offer.  Keating recommends that applicants say their focus is on the job and they need clarity about the role they would fill.

As Keating points out, relying on salary history has been shown to contribute to the gender pay gap between the earnings of men and women. The National Women’s Law Center broke down women’s earnings demographically based on 2016 data and found that for every dollar earned by a white, non-Hispanic man: Asian American women earn 85 cents, non-Hispanic white women earn 75 cents, African American women earn 63 cents, Native American women earn 58 cents and Hispanic women earn 54 cents.

“HR managers are becoming more accustomed to push back from applicants who reuse to reveal their salary history, but they’ll still ask and I tell my clients not to ask,” she stated.  HR managers in some areas soon will be unable to ask for salary history information, based on laws adopted during the past year in many locations.

Massachusetts paved the way in August 2016, when Governor Charlie Baker signed legislation that forbids employers in the state to ask prospective employees for their salary history during the job interview process.  The Massachusetts law, which takes effect July 1, 2018, requires hiring managers to state at the outset the amount a job will pay.

Philadelphia became the first city to pass similar legislation.  Its ordinance, signed in January and going into effect in May, bans employers from asking job applicants about their salary history.

In September 2016, the governor of California signed legislation stating that a person’s salary history cannot be the only reason for a pay disparity.

Several jurisdictions have used executive orders to restrict government agencies from inquiring about their job applicants’ salary history.  The Washington state legislature is considering a bill (HB 1533) that would prohibit employers from requesting an applicant’s salary history before they make an offer.  On the national scene, Rep. Eleanor Holmes Norton (D.C.) is likely to reintroduce her Pay Equity for All Act in Congress.

The legislation, largely seen as a boon to women because of the gender pay gap, also could benefit members of other minority groups.  “I think this legislation will help any group that has been discriminated against,” Keating said.

Establishing what an employee is worth and having a formal compensation system will provide companies a strategy in attracting, hiring, and retaining employees.