This article is originally published in smartcompany.
The US arm of retail giant Amazon has reportedly banned managers from asking prospective employees about their salary histories during the hiring process, in a move designed to encourage pay equity between men and women.
But while Australian human resources experts say the practice could be useful to local firms, they believe small businesses will be reluctant to take it up.
According to Buzzfeed News, a memo sent to hiring managers and recruiters associated with Amazon outlines a ban on questions relating to a candidate’s prior or current base pay, bonuses or other information about salary packages. The memo also bans the use of such information as a basis for determining whether or not to hire someone.
The move comes after several US states introduced laws banning job interview questions about salaries, with those supporting the approach saying it contributes to pay equity because it creates a level playing field. The argument is that male candidates tend to have higher former salaries to bargain with when entering salary negotiations when compared with their female counterparts, and this can influence their future salaries.
The policy applies to US workers being hired by Amazon, but human resources expert and founder of Career Money Life Sandy Hutchinson says Australian businesses could also benefit from avoiding discussions of prior salaries at the outset because this would remove some of the “embedded issues” around pay inequality.
However, she says a balance needs to be struck on this issue to ensure there are no “misaligned expectations” between candidates and employers around salary.
“Think of salary as for a role, rather than for an individual,” she says.
Hutchinson says businesses really need to nail down the salary band they expect to pay before they start recruitment, then focus on finding the individual who is the best person for the job.
“Have in your own mind a range, and highlight it early on so you [and the candidate] at least agree on a ballpark. As it progresses, make sure that the person is the right fit,” she says.
Employers need to do more research
Recruitment expert Ross Clennett says he hopes more Australian businesses take a leaf out of Amazon’s book and stop discussions of prior salaries in interviews, but he is doubtful the practice would be popular.
“In reality nobody is going to do this, and businesses tend to be dragged kicking and screaming on things like this,” he says.
The bigger problem for local SMEs is that many businesses are unaware of the market rate for a role, Clennett says. This can prompt them to ask a job candidate for their former salary, but this is often ineffective because employers might not be prepared for the answer.
“Say you’ve got a customer service team with three people and you’re hiring, if those employees [you already have] have been there a long time, they could be significantly underpaid [compared to the market],” Clennett says.
If an employer isn’t really sure what they are supposed to pay for a role, when they do eventually hear a candidate’s salary expectations, they can often be surprised because the response isn’t in line with what they were willing to pay anyway.
“Then the employer ends up deflated, and has wasted everyone’s time,” he says.
A better option for businesses would be to avoid discussing the previous salary of a candidate at interview stage and instead do prior research to establish what a competitive offer for that role would be before advertising the position, Clennett suggests.
“The employer has just really got to be more prepared,” he says.
Hutchison agrees that best practice for small businesses is to understand clearly what salary offer would be appropriate for the position and work from that point.
While it’s advisable to signal the salary range up front, she says basing a position’s salary off how much a potential employee used to make is not an ideal way to find the best candidate for the job you want to fill.
“At the end of the day, it is none of their business what someone was making in a previous role,” she says.