Massachusetts Governor Charlie Baker signed a bill into law on August 1, 2016 that has the potential to change the way that salaries are determined in a major way. The law bars employers from asking about what an employee candidate made at previous jobs. Additionally, employers are no longer allowed to forbid employees to talk about their wages or benefits with other employees as a condition of employment.

Equal Wage Impact

The main goal of the law is to end cycles of pay inequality for women and minorities. Since many employers offer a similar or slightly higher salary than an employee candidate’s previous job, employers will have to create more consistent criteria regarding what a position is worth within the company. Hypothetically, this will help to stop employers from paying employees different salaries for the same work.

While it is unlikely that most employers consciously discriminate, revealing a salary that is lower than expected or lower than average may devalue an employee’s aptitude from the perspective of the employer. With little to go on besides the employee’s word and the recommendations of references, employers are likely to believe that an employee candidate’s previous salary was fair and offer a similar salary.

Recruiting Impact

Salary will still need to be part of the recruiting conversation so that employees know whether they will accept a position. This will cause a shift in the way that positions are advertised, as employers will have to be more forthright about the salary that positions will come with. This may tip the salary negotiation in the employees’ favor.

Pay Transparency Impact

Pay transparency has already been a subject that has come up a lot in recent years. Since employees will now be able to freely discuss their salaries without fear of retribution, the stigma surrounding sharing information about salaries and benefits will begin to dissipate and pay transparency will take its place. This may help to build trust between employers and employees and mitigate issues of perceived unfairness by opening up the floor for discussion about pay differences.

Potential Salary Increase

The law has the potential to boost salaries across the board. Many employers hold out from offering a salary until an employee’s old salary is learned, after which the salary offered is just a bit above the employee’ old salary. If employers do not have this cushion, they will be likely to offer something that is closer to the industry average or perhaps slightly above the industry average.

In addition to this shift, companies may begin to advertise the pay offered for more positions right on job postings. Offering competitive wages is a good way for employers to attract the top talent in the industry, especially when the proposed salary must be revealed very early in the recruitment process.

Potential Far-Reaching Impact of Law

The law was only passed in Massachusetts at this time and will not actually go into effect until July 2018, but has the potential to effect change in other states and across the country. Employees may begin to expect payroll transparency and the simple fact that a law was passed forbidding employers from asking about previous salaries may change employees’ comfort levels with revealing the information freely. This law is highly likely to ultimately spread across the country and change hiring practices on a far-reaching scale.

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