New compensation laws across the U.S. barring companies from asking applicants their current or previous salary are about to change the way money managers recruit personnel.
While some industry insiders are optimistic that the new laws could narrow the pay gap between men and women, others warn that it could increase overall compensation costs and carry penalties for organizations that violate the laws.
Effective Oct. 31, the New York Local Law 67 of 2017 prohibits employers based in New York City, or those that have a presence in the city, from inquiring about a prospective employee's salary history during the interview process.
"We are taking this very seriously. We believe it is going to have a significant impact on recruiting," said Scott Fletcher, a partner in Jamesbeck Global Partners' San Francisco office, an executive recruiting firm.
For example, recruiting firms create compensation packages for clients. Part of that process involves gathering and using historical compensation data, Mr. Fletcher said. But if a candidate's personal compensation history is no longer allowed to be used, recruiting firms will need to find other ways to provide those industry ranges to clients.
David S. Rich, an independent employment lawyer and business litigation attorney in New York, said the law aims to narrow the pay gap between men and women. "On average, women are paid less than men for the same work, and because your current salary is generally based on your previous salary, (asking for salary history) perpetuates that gender wage discrimination. This law aims to break that cycle."