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Don't ask about salary history if you want to improve the gender pay gap

Written by Simon Walsh, Christine Caffrey on Thursday, 10 March 2022. Posted in Insight, Leadership, Analysis, People

The Fawcett Society has recently urged employers to stop asking about salary history, due to findings that it contributes to the gender pay gap by keeping women on lower wages.

Don't ask about salary history if you want to improve the gender pay gap

The Fawcett Society has recently urged employers to stop asking about salary history, due to findings that it contributes to the gender pay gap by keeping women on lower wages. With equality and inclusion ever higher on company agendas, failing to tackle gender bias may not just have an impact on an organisation’s ability to recruit and retain staff, but also on its commercial contract opportunities.

Key findings from the charity, which campaigns for gender equality and women’s rights, found that 47% of people are asked about previous salary during recruitment. It also found that 58% of women and 54% of men felt they received a lower salary than if they had not been asked about previous pay.

During the recruitment process, applicants are often asked what their salary expectations are for their new role but, and perhaps more critically, they may also be asked what their current earnings are.  These findings may not come as a surprise but the impact of asking about salary history can be far-reaching and could raise questions around equal pay, gender equality, and discrimination.

There may be good reason for employers to ask about salary history.  Some use it to determine whether they are offering the right salary. For example, if an employee is already paid far more than the employer was intending to offer, it may mean the employee is overqualified, or the employer may need to reconsider the salary. 

However from an employer’s perspective, there are discrimination risks in offering different pay to different employees performing the same role, where there are protected characteristics at play. For example, if a woman were to be offered a lower salary than a man in the same company performing the same role this could amount to discrimination on the basis of sex.  

There is no legal requirement to stop asking about pay history in the recruitment process but asking about salary history can widen any pay gap already in existence.  If someone is paid poorly early on in their career, it could follow them throughout their working life. The Fawcett Society found the best ways to determine pay were to consider the skills and responsibilities to the job and the value of the work to the organisation, and not salary history.

Employers should consider undertaking an objective benchmarking process to determine the appropriate salary for a job role, irrespective of the successful applicant’s salary history. Government bodies, public sector, and many private companies already opt to use pay grading/pay bands, which can lead to a reduction in the gender pay gap. This gives flexibility within a range of salaries but ensures a minimum is set for the role that would not be affected by a job applicant’s existing salary.

Employers should also be mindful of equal pay legislation more generally to ensure that they are operating fair processes not only in recruitment, but also when it comes to annual pay reviews or the awarding of bonuses.  Salary reviews should be undertaken on a broader scale, so as to assess the workforce as a whole as well as on an individual basis. This way, employers will pick up any individual who may not be earning at the same level as their peers and can take steps to improve the situation before any claim arises.

Values driven businesses with gender equality at the heart of their agenda may go one step further.  Care will be needed if this sees the development of clauses which require a party to confirm that it has specific recruitment polices in place, perhaps with audit provisions in them to ensure compliance, and careful thought on how to deal with one would be needed to ensure that a business could properly sign up to that kind of obligation to avoid the risk of breaching it.  Dealing with one in negotiations may also be difficult as would be suppliers may be wary of presenting the ‘wrong’ impression to a potential customer that is looking to enshrine its own values in its supply chain.

Businesses dealing with consumers also need to exercise care over what’s said about recruitment and pay policies in marketing material to emphasise their brand credentials.  Consumer protection law generally prohibits unfair commercial practices and could be breached by false statements that cause, or could cause, an average consumer to buy something they wouldn’t have otherwise taken.

Employers must be mindful they have an important role in tackling the gender pay gap, not just within their organisation but outside it too, and could be detrimentally impacted in both an employment and commercial sense if they don’t adopt effective equality practices. 

About the Author

Simon Walsh

Simon Walsh

Partner in the Commercial Litigation & Dispute Resolution team
Christine Caffrey

Christine Caffrey

Employment solicitor at SA Law

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