Best Practice for Verifying Salary Data and Paying Equity Compliance

Employers seek to learn as much as possible about applicants during the hiring process to make a well-informed selection. Checking someone's criminal records, asking where they've worked, and seeing where they went to school are all important parts of the process. However, one thing that usually doesn't turn up in an employee background check is how much money someone made at their previous job.

Pay or salary information is important because applicants want to know what to expect and businesses must manage their costs. When negotiating a salary for a position, some employers may want to ask about what the individual made in their previous role. The thinking goes that verifying this information will expose dishonesty in the negotiating process and equip employers to create a competitive but reasonable offer.

However, the reality of this process is far more complex than running a routine background check. A challenging legal environment and a growing effort to combat pay inequality mean employers must think carefully about this process. What should you know?

Asking for Salary Verification is Fraught With Risk

Although it may seem like a smart move to better position yourself for salary negotiations, asking directly about someone's previous pay rates is almost always unwise. This practice is increasingly illegal, and in fact, it is not allowed in nearly half of the country. Twenty-one states have now enacted a partial or complete ban on asking about an applicant's past salary history. In some states where you may still be able to ask, such as Alabama, you're prohibited from taking adverse action of any kind if an applicant simply refuses to answer.

Past employers are unlikely to be forthcoming with this data due to the risk of facing lawsuits from former employees. Asking someone to furnish their W2 information not only means you must handle sensitive data securely, but this, too, could open the door to future claims of unfairness or discrimination. In general, it is not as straightforward to conduct salary verification as it is to do a background check on someone.

Simultaneously, many areas have passed or will soon pass pay equity laws aimed at reducing gender wage gaps. These laws mandate that you post the salary range or wage information on all job listings. Failing to do so can mean fines and other regulatory actions.

What Best Practices Should You Use?

All the power in this situation may seem to be tilted towards job applicants. However, you can still implement some best practices to make it easier to understand how you compete on compensation. Keep these tips in mind:

• Use benchmark data from your industry. Many websites and some services gather salary information anonymously and use it to create benchmarks for job positions and industries. Reference this data when trying to set compensation.
• Avoid asking about salary — even if you do not live in an area where it is illegal, it is too much of a risk to take.
• If you must verify someone's salary, consult an employment lawyer in your area.
• Be wary of unfair compensation between similar job roles that could create the impression of bias or unfairness.
• Post salary ranges for all jobs, whether required or not. Applicants want to know — don't hide this information.

Find Other Ways to Vet Your Candidates

Even if you cannot always include salary as a component of an employee background check, there are many other and more important ways to conduct adequate vetting. Drug tests, criminal history checks and more all provide you with the vital information you need. Leave salary negotiations as just that — a negotiation based on finding common ground between what you and the individual think is fair.