What Every Employer Should Know About California’s New Salary Disclosure Law

Shaun Enders

Salary negotiations are always a tricky part of the hiring process. Until recently, wage negotiations were like a live auction: employers would make their “bid” for staff salaries relative to “previous bids”, i.e. the applications previous salary.

However, updates to California Labor Code Section 432.3 have changed things significantly. The new salary disclosure law prohibits employers, or their agents, from asking job applicants about their salary histories. This measure was put in place to level the playing field among applicants and ensure that individuals don’t become trapped in stagnant salary ranges. Now the process is more like a silent auction. Employers are “bidding blind” with a less solid point of reference. How do these new restrictions affect employers?

Here’s what you need to know to ensure that you are attracting and retaining top talent — without unknowingly violating California employment law.

What’s included under California’s new salary disclosure law?

The law prohibits employers from inquiring about the value of entire scope of previous “compensation and benefits” including:

  • Base salary
  • Bonuses
  • Company equity
  • Health insurance
  • Stipends
  • Other monetary benefits

At this point, a company or its agents may be able to inquire as to if “there are any benefits that the candidate would be giving up” that may inhibit their decision to take this new position. However, employers are restricted from asking about the specific monetary value of those benefits.

How a corporate recruiting partner can help

Because recruiters are acting as agents for the business, they, too, are prohibited from inquiring about a candidate’s compensation history. However, they can play an important role in brokering the compensation conversation. Corporate recruiters place hundreds of professionals in specific verticals every year. They have first-hand experience with the salary demands of particular professions. As such, are in tune with the realities of compensation specific to the area and industry.

Recruiters are intimately familiar with regional supply and demand and can help shape salary expectations —for both employers and candidates—based on the de facto going rate. This insight can be invaluable to an employer, particularly small businesses who lack the resources to conduct an in-depth analysis of industry-specific, localized salary benchmarks. A recruiter can manage expectations, ensuring that employers are offering sufficient compensation packages to attract top talent. In short, a recruiter can help zero in on the sweet spot.

What to do instead of asking outright

If this new salary disclosure law places such tight restrictions on the salary inquiry, how can employers conduct the salary conversation? The good news is that there are many options to further the discussion without asking a candidate outright for their salary history. Here are some options:

  • Ask a candidate what salary range they’re looking to earn
  • If a candidate volunteers their salary history unprompted (okay under the law), take it into consideration—but make sure it’s not the sole factor in your salary decision
  • Establish a competitive pay scale commensurate with the marketplace
  • Prepare a pay range for the position in advance
  • Be clear with candidates upfront with regards to your allocated budget so as not to waste everyone’s time

It’s not always about money

Based on what you discover about salary ranges for your organization’s open position, you might discover that your company simply can’t match the industry-wide pay scale. All is not lost. Today’s corporate environment places a greater emphasis on work-life balance, so creative perks and benefits play an important role. Work with your corporate recruiting partner to brainstorm incentives for employees that don’t require an additional spend. Things like paid-time-off, work-from-home schedules, shortened work-weeks and other deal-sweeteners can attract talent for whom salary is not the only determinant in their job search. A big-picture perspective helps you slot in the right candidate, not necessarily the most expensive candidate.

Just because a candidate applies for a job with a particular salary doesn’t mean that the pay structure is a done deal. Most candidates—and employers—see this as simply a starting place. And so begins the back-and-forth of determining a final salary that satisfies both candidate and employer. Though you can no longer use previous salary history as a point of reference, you can use your recruiting partner as a real-time data resource. Their insight will help you avoid the guess-work that can lead to overpayment, or the incorrect assumptions that cause qualified candidates to overlook your organization. Be forthcoming, realistic and creative, and you’ll end up with a quality candidate that feels sufficiently compensated.

Want to know more about how California’s new salary disclosure law will impact your staffing efforts? Contact our expert recruiters today and let’s talk.