Asking applicants their salary history – is it illegal?

Employers should know that salary history is different from salary requirement.

Asking applicants their salary history – is it illegal?

When interviewing and screening through many job applicants, it is tempting for hiring managers to ask about their salary history. Yet is it right for companies to ask a question like this? Is it even legally allowed?

Below we look at whether inquiring about an applicants’ salary history is legally and ethically accepted in Canada.

Read more: How will the Pay Transparency Act impact your organization?

Salary history vs salary requirement: know the difference

Salary history is when an employer or a hiring manager asks the job applicant to list down every salary they earned from all their previous employers listed on their resume. A salary history is more detailed as it goes beyond the applicant’s recent employer, which is what employers usually ask during interviews. A salary history typically includes the name of each company, job title, years spent in each role, and the past salary and benefits packages the applicant received.

Salary history is different from a salary requirement. A salary requirement, also known as salary expectations, is the amount of money job seekers need or expect to receive from a potential employer. Many factors contribute to the chosen salary requirement, such as industry, skills demand, work experience, and cost of living.

The two terms are different from each other as salary history is based on what the candidate has already received in the past from previous employers, while salary requirement is what they now expect to receive from a future employer. The salary history can also affect the salary requirement the applicant is asking for but not the other way around.

Salary history in Canada

There has been a lot of growth in Canada in terms of legislation to help close wage gaps and have better pay transparency. For example, Ontario became the first province in the country to pass a pay transparency legislation. Since January 1, 2019, Ontario-based businesses have required all publicly advertised job postings to include a salary range, prohibit reprisals against employees who discuss or disclose compensation, establish a framework that requires larger companies to track and report compensation gaps based on gender and other diversity factors, and stop employers from asking a candidate about their past compensation.

Jennifer Hodgins, former senior associate and now partner at Norton Rose Fullbright Canada, told HRD Canada that Ontario’s legislation helps with solving the gender wage gap.

“The purpose behind this is to deal with the prevalent gender wage gap. It’s believed that addressing prior compensation or having employees un-linked to their past salary will help combat the problem, as female candidates historically have lower wages than their male counterparts.” Hodgins says.

However, aside from Ontario’s Pay Transparency Act, there is no clear federal law regarding salary history directly. So while it may be legal for employers to ask job applicants for their salary history, it could still be a sensitive topic to many and should be handled properly.

Problems you might encounter when asking for salary history

Many employers ask potential employees during the hiring process about their salary history. While they think it is a practical and harmless question, it could lead to many problems that may damage the image of the company.

Requesting for a salary history, especially when asked in an uncomfortably assertive manner, can make the employee uncomfortable and less interested in the company. In addition, it could lead to applicants looking for other companies instead. They could even tell their connections about their negative experience with the company’s hiring process – losing potential applicants and customers.

Asking about salary history could also lead to a pay discrimination accusation against the employer. Often, an employer will base their offered salary on the applicant’s previous salary, which could be an issue, especially if it is proven to be substantially lower than what the applicant deserves based on their market value, their experience, skills, and expertise. In addition, many good candidates feel it is a violation of privacy if a company is insistent on knowing their salary history. This can make the applicant dislike the company and not choose the company as their new employer.

Read more: Should HR stop asking candidates about their current salary?

What employers can do

Employers should understand how to approach the topic of salary history properly. The main reason employers ask for salary history information is to see whether the company can afford the candidate if hired. If the applicant’s previous salaries and employment packages fit the company’s budgeted salary range, then the company is confident in offering a salary package. The inquiry may be based on a reasonable purpose in the eyes of the employer, but the inquiry could make employees feel that they are being put at a competitive disadvantage, and the offer could be less than what they were expecting, especially if they were unfairly paid before.

Even if it is legal to ask for someone’s salary history, it is best for employers and hiring managers to avoid bombarding candidates about their previous pay. Instead, employers should ask about pay expectations for the new role. The human resource department should determine the position's value available through market research. Having updated data on the role plus the average salary expectation candidates want can help the employer decide on a competitive and fair pay package suited to the applicant.

Even if the fair compensation package offered is lower than the applicant’s expectation, they are allowed to negotiate to an amount that satisfies their needs while being acceptable with the company.

Companies need to stop relying on applicants’ past pay to determine their future salary. It is essential for employers to understand the role and employee’s worth. This includes the skills, knowledge, and level of expertise needed for the role.

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