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Executives mindful of salary history legislation but doubt it will improve pay equity situation, Hay Group survey finds

November 15, 2017

A majority of executives believe their organizations will be affected by new legislation aimed at closing pay gaps for women and other underserved populations, according to a survey released by the Hay Group division of Korn Ferry International Inc. (NYSE: KFY). However, most don’t believe the legislation will achieve the desired results.

Cities and states across the US — including California, Massachusetts, Delaware and Oregon — are at various stages of enacting legislation to prohibit employers from asking job candidates about their salary history and using the information in making pay offers. New York City enacted such legislation recently. Proponents say that basing pay on past wages can perpetuate the earnings divide.

However, whether the new laws will improve gender pay equity remains to be seen. Most executives polled, 65%, believe that the law will not, or only to a small extent, improve the gender pay equity situation in their organization. And although further action on pay equity is likely ahead, only 19% of organizations say they are well prepared to handle the new laws once they go into effect.

Many large organizations indicated that they are likely to get ahead of the issue by changing their national policies instead of waiting for individual cities and states to pass measures. Nearly half of the executives polled, 46%, said choosing to comply with the most stringent legislation is their likely course of action, as opposed to complying with each local legislation.

“As a result of this legislation, many employers will need to seek out better market data and conduct more rigorous analyses to determine what a job should pay versus relying on the crutch of a candidate’s compensation history,” said Tom McMullen, senior client partner in Korn Ferry Hay Group’s reward and benefits group. “Organizations need to ensure they have an effective job evaluation process that provides the right criteria and credibility for assessing the size of jobs.”

The survey took place in July and August 2017 and included responses from 108 companies from a broad range of industries and company sizes. Sixty-three percent of respondents were either CHROs or other C-suite executives.