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Growth Strategies / Hiring

What It Means for Your Hiring When Businesses Are Forbidden From Asking Applicants About Salary

Salaries are increasing, which means every hire is more important than ever.
What It Means for Your Hiring When Businesses Are Forbidden From Asking Applicants About Salary
Image credit: ONOKY | Eric Audras | Getty Images
- Guest Writer
Co-founder and CEO of SingleSprout
5 min read
Opinions expressed by Entrepreneur contributors are their own.

Earlier this year, a law that forbids employers from asking about an applicant's salary history went into effect in New York City. The move followed on the heels of similar legislation being passed in California, which means that two of the technology titans of the country are subject to these new rules.

Related: The Key to Hiring the Best Candidate Is Deciding What's Most Important

In addition to the war for top talent dividing top companies from startups, there are far more open engineering positions than there are qualified engineers coming out of programs with the right training to step into those roles.

This won't be the single catalyst to make people move jobs, but it will fundamentally change the way tech companies hire -- and especially compensate -- their employees. Salaries are increasing, which means every hire is more important than ever. This is especially true at startups and young companies, which can't afford even one bad hire and are in need of people who will stick around for the long haul and really believe in the company's mission.

In my work as the co-founder of SingleSprout, a tech-driven recruiting startup that helps hire for fast-growing startups in New York and Silicon Valley, I've worked with companies and job seekers alike. According to our most recent compensation analysis, those who are asked about their previous salary are offered, on average, an 8.3 percent increase. Those that are aren't asked get an increase closer to 12.5 percent in base salary, plus any other benefits they're leaving their current position to seek.

Related: When Does It Make Sense to Pay Employees Above the Average?

This will positively shift power into the hands of candidates and keep them from being underpaid or anchored, not least of all female and minority prospects, who will be able to make a fair salary according to the current market, rather than what they were priced at in their previous position.

How can hiring managers and prospects learn to deal with this new dynamic? There are a few ways.

Now that companies will pay more to get the best talent, it can be daunting to ensure that every hire is a perfect fit. Unfortunately, when it comes to hiring, there are no guarantees. Between technical skills, past experience, cultural fits and plans for future career growth, a lot of factors can influence what prospects are looking for in their work environment -- and what they bring to it, once hired. The best way to reduce hiring risk is by hiring people that a current employee can vouch for. When that isn't possible, I've seen firsthand that the companies that see the most success with hiring and retention implement the following: well thought-out technical interviews, rounds of cultural interviews and a thorough understanding of the candidate's motivation and goals.

Related: How to Attract -- And Retain -- Staff When You Can't Pay Big Bucks

It may seem simple on paper, but it's critically overlooked in practice.

Other than compensation, there are other things companies can leverage, such as: a high-caliber engineering team (people want to work with smart peers); compelling tech challenges (boredom and not being challenged are big reasons why engineers leave their jobs); equity for the potential to make significant earnings; ability to make an impact through limited legacy code, small teams and quick sprints; and accelerated growth (companies that grow fast require employees to learn quickly).

Unfortunately, when building a company, there is no credence to the mantra, you can't put a price on talent. Employees need to be paid; one of the most critical jobs of an employer is developing the formula for making sure it's done fairly. A common way of calculating compensation, now that past salaries are off the table, is by using "expected compensation." This method produces a number aggregated from a combination of the prospect's expectations compared to what other engineers with similar experience are making as a good sweet spot to gauge reasonability.

Related: Fixing the Pay Gap Starts With Your Salary Negotiation Skills

However, keep in mind: if those candidates are being offered a lot more by the Googles or Facebooks, internal budgets don't matter. The market price has been set. It's one more thing that company-runners have to keep in mind now that these laws have gone into effect in New York and California.

If you undervalue your employees in regards to compensation, it may not be long before they feel undervalued in other regards, too. Keep the door open for a two-way conversation, and hear these prospects out now that they've been given more of a voice. Job seekers are looking for a work environment in line with what they value. What do you, as an employer, value?

If you're looking -- like many are -- to build a product-driven company, engineers are crucial because they are the lifeblood of the business. When the cost of lost productivity outweighs the cost of an extra $10,000 or $15,000 in compensation to hire an engineer, it's a no-brainer.

Related Video: Don't Have Money to Pay Employees? You Can Still Build Up a Great Team.

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