Sep

New pay equity legislation and how it affects you

by Ashlee Wagner
Practice Leader at Charles Aris Inc.

Waves of change are rolling through the recruiting world as pay equity legislation goes into effect for an increasing number of cities, counties and states around the United States.

You might be asking yourself: What is pay equity and / or pay equity legislation? If so, head to our dedicated webpage for updates on new pay equity laws to learn more. The intent of most pay equity legislation is to prohibit employers from discriminating on the basis of gender or ethnicity in the payment of wages.

Now that you understand the basics, you’re probably thinking: How does this affect me? For our team of recruiters here at Charles Aris Inc., it’s been a unique shift in mind-set from “What is the candidate currently making?” to “What are the candidate’s compensation expectations?” and “How does that align with what our clients are willing and / or able to pay?” Whether you’re seeing this through the lens of a candidate or client, here’s some guidance for thinking it all through:

Candidate perspective

For those of you who don’t enjoy discussing your current compensation with potential employers, you can breathe a sigh of relief – at least within the states where pay equity legislation has been passed. Moreover, organizations in the affected states might not even be allowed to know your current compensation, so there might be some “covering of ears” even if you were to volunteer such information. Some recruiters are now legally prohibited from recording that personal data or using it in any way to put together a job offer.

This isn’t a practice in all states. However, the “covering of ears” might occur in some organizations taking a firm stance on this practice – whereas in other circumstances, what you say may or may not be used when putting together an offer.

We fully understand that these new laws are making things tricky for some candidates. Historically, many candidates have based their compensation expectations on an increase over their current compensation. Over our 49 years in executive search, the Charles Aris team has tracked this. Typically, A-level talents who are passively searching for new roles will leave for a compensation bump of 8 to 12 percent. (We’ve certainly seen situations where this percentage has spiked one way or the other, and there are a number of factors which could contribute to a higher bump in compensation or a candidate being open to a 5 percent increase, for example, or even a pay cut. But 8 to 12 percent is a good rule of thumb.)

Keep in mind that you can still use the percentages above to identify what your compensation expectations should be, especially if you don’t know the market norms.

The headline: Be informed about pay equity laws affecting you as you apply for career opportunities. In states and cities affected by pay equity legislation, be ready to discuss your compensation expectations rather than your current compensation, knowing that you might come across a scenario where your expectations do not align with what a prospective employer can afford. While this can be tricky, be open (and firm if needed) to make sure you aren’t wasting your time with opportunities which don’t align with your own expectations.

Client perspective

If you reside in one of the areas affected by pay equity legislation, I’m sure this isn’t new news to you – especially if you’re in recruiting. It’s critical that organizations affected by these new laws stay on top of and abide by the laws when interviewing candidates, as violations can range from $100 to thousands of dollars in fines, civil injunctions and administrative oversight by federal and state organizations.

Historically, candidates have based their compensation expectations on an increase over their current compensation. Because organizations in affected locations are no longer able to ask for this information, there must be a new way to identify what a candidate is “worth” to those organizations. Lots of organizations are bound by budgets and / or internal compensation banding systems, so this isn’t a free-for-all by any means. However, there’s a significant shift happening.

It’s no longer about giving candidates a slight increase over their current compensation to attract them to a new role. It’s more about the value this professional will add to the organization and the quality of the talent in it.

Does this mean that someone who was vastly underpaid in her prior organization could step into a new, properly aligned role with a 30 percent bump in pay? Yes. But this also means that organizations need to be strategic when thinking about talent, and align compensation appropriately. Some organizations might even need to rethink their internal compensation banding systems based on what they’re hearing from candidates – thereby remaining competitive in the marketplace.

At Charles Aris, we’re seeing candidate compensation expectations creep upward, especially in today’s hot candidate market. Don’t get me wrong: That doesn’t mean hiring authorities need to overpay for talent. But you do want to decide which approach to take when it comes to compensation and finding the best talent for your team. You might consider being flexible on the range you pay for a particular role to make sure you can attract a rock-star talent. You also might take a firmer approach in passing on a candidate if his expectations don’t fall in a predetermined range.

The headline: Stay informed about pay equity laws affecting your organization as you recruit A-level talent, especially given the implications of violating these laws.

The good news? Here at Charles Aris, the shift from asking about current compensation to asking instead about expected compensation is going well so far. It’s helped us save our clients’ time by nailing down candidate expectations and making sure there’s alignment up front.

If you do not work or hire in one of the states affected by pay equity legislation, no need to worry about this … yet. We do see this as a movement on the rise, however, so it’s time to start thinking about what approach you’re going to take – whether you’re a candidate or a hiring authority – to ensure you’re ready for the shift if or when it occurs.

To learn more, call Ashlee Wagner at (336) 378-1818, extension 9142, or email her at ashlee.wagner@charlesaris.com.