It’s official, Hawaii has joined the growing list of states that ban employers from asking about an applicant’s salary history.
The Equal Pay Act (SB 2351) was signed into law by Governor Ige on July 5, 2018 and went into effect January 1, 2019. It prohibits employers from “requesting or considering a job applicant’s wage or salary history as part of an employment application process or compensation offer.”
What does this mean for employers?
To be frank, the salary history ban will further complicate the business of being an employer in Hawaii.
“Salary history is a common question to ask during the hiring process,” says Director of HR Michele Kauinui. “But an applicant’s current/prior compensation and benefits will now be considered a prohibited inquiry in Hawaii, similar to asking about an applicant’s criminal record prior to a conditional job offer. ”
To help ensure compliance, employers will need to review their paper and online applications as well as train hiring managers on the new law.
If an applicant voluntarily and without prompting discloses their salary history, an employer can use that information in setting compensation, though caution should be exercised when doing so. They may also—without inquiring about salary history—engage in discussions about an applicant’s salary expectations or preferred pay.
The ban does not apply to:
- Applicants for internal transfers with their current employer;
- Public employees whose salaries are determined by collective bargaining; and
- Salary history information inadvertently discovered during routine employment verification or background check processes.
In this last instance, while a previous salary may be known, it may not be used to determine salary, benefits or other compensation, or in negotiation of an employment contract.
How to talk salary without salary history
With the new law, employers may be wondering how to make an offer that not only secures (and retains) great employees but also keeps their bottom line in check.
“Start by having a salary or pay range for the position,” says ALTRES Manager, Emy Yamauchi-Wong. Employers should research the market value for the position and be honest with candidates about what they can offer.
“This is helpful when you have candidates with different levels of experience. The higher pay would be offered to someone with more experience, not to someone who had a history of higher pay.”
Another key point: state that the offer is just a starting point. “Many candidates will likely feel like they are worth more than what’s being offered, so it’s imperative to highlight any non-monetary perks of the job, like advancement opportunities, professional development, flex-time, parking, wellness discounts, etc.”
Why make it illegal to ask about an applicant’s salary history?
The Equal Pay Act is intended to end the cycle of pay discrimination for women and minorities in Hawaii. Because hiring managers often base job offers on a candidate’s past pay, a low wage at a previous job can affect salary at later ones—leading to a lifetime of lower earnings.
In Hawaii, women earn 84 cents for every dollar paid to men, which amounts to a median annual wage gap of $7,640 (April 2017). It’s not the largest wage gap in the country, but still leaves a lot of room for improvement.
U.S. Salary History Ban Legislation
As of July 2018, 14 states have enacted laws prohibiting employers from asking an applicant for their salary history. However, two states—Michigan and Wisconsin—have gone against the grain and in essence, banned salary bans.
If you are a client of simplicityHR and have questions about being compliant with the Equal Pay Act, contact your HR team, today!
This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.