Starting October 31, 2017, employers in New York City will not be allowed to legally ask about a candidate's salary history. The law, which was approved by the New York City Council in May 2017, applies to both public and private employers. NBC News reports how supporters of the ban hope it will help reduce discrimination and even help to close the wage gap between men and women.

Fines for Employers

The law prohibits inquiring about the previous salary of an applicant by asking directly or conducting a search of publicly available records. The law also bans employers from relying on the salary history of an applicant to determine their salary at any stage in the employment process. The exception is if the applicant willingly discloses that information. The ban also doesn't apply to current employees looking for a transfer or promotion. For employers, the penalty for breaking the law are fines of $125,000 for unintentional violations and up to $250,000 for maliciously intentional violations.

Challenges for Finance Leaders

For finance leaders, the ban may be seen as a challenge to long-standing practices. Asking about a job candidate's previous salary can be common in interviews and employment applications. In preparation for the new law, interviewers will have to be trained to avoid asking about salary history and applications will need to be overhauled to exclude such questions. In addition, finance leaders should inform third parties like recruiters and staffing firms to stop sending such information.

The major change, however, will be in calculating what reasonable compensation is without having a concrete salary history. In lieu of such information, negotiations may likely be more drawn out than usual. Since similar legislation is gathering steam in other municipalities, organizations with a national footprint would also be wise to take note of the New York City law.

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Tags: compensation