Salary history can reinforce pay gaps when a new employer treats prior compensation as the starting point for a new salary. If an applicant was underpaid before, a formula such as a fixed percentage increase over prior salary can carry part of that earlier disadvantage into the new job. That does not mean every use of prior pay creates unlawful discrimination, but it creates a structural risk. Employers can reduce that risk by setting ranges from the job, market and internal pay structure, then using documented factors such as relevant experience, skills, responsibility or location to decide where a candidate falls within the range.
Jurisdiction: United States
Prior Pay Can Become an Anchor for a New Offer
Salary history creates a simple number for recruiters and hiring managers to use during negotiation. The risk is that the number describes the applicant's previous employment relationship, not necessarily the value of the new job. If the employer starts from prior salary and adds a fixed percentage, the new offer may be driven more by what another employer paid than by the current role's responsibilities, market position and internal pay structure. This can make the new employer dependent on an earlier compensation decision it did not design and may not be able to explain.
Percentage Increases Can Preserve Earlier Differences
Suppose two candidates are otherwise similarly situated for the same role but enter the process with different prior salaries. If both receive the same percentage increase, the absolute gap between them remains. Repeating that method across promotions or job changes can preserve or enlarge earlier differences even where the current employer did not intentionally create the original disparity. The point is not that every prior salary reflects discrimination. The compliance concern is that a salary-history formula imports an unexplained historical difference into a new compensation system instead of testing the current job and candidate factors directly.
Prior Pay May Reflect Different Jobs, Markets or Negotiating Conditions
Previous salary can be a weak proxy for current job value because the prior role may have involved different responsibilities, geography, industry economics, working hours, benefits, bargaining power or organizational pay philosophy. Even where no unlawful discrimination occurred, those differences can make the number difficult to compare. A current employer that relies heavily on prior pay may therefore be mixing several unrelated factors into one figure. Job evaluation, market pricing and internal ranges separate those variables more clearly and give the employer a direct basis for explaining the new salary.
Salary History Restrictions Shift Attention Toward the Current Job
One policy rationale for salary-history restrictions is to move compensation setting away from a backward-looking number and toward the new position. California illustrates this design by restricting salary-history inquiry and reliance while allowing employers to ask about salary expectations and requiring pay-scale disclosures in covered contexts. The legal details differ elsewhere, but the operating principle is useful more broadly: define the role's range first, then discuss expectations within that framework. This makes the compensation conversation about the current opportunity rather than about reproducing an applicant's previous pay trajectory.
Job-Based Salary Ranges Provide a Better Starting Point
A salary range gives the employer an internally controlled reference point. The range can be based on job value, market data, location, bargaining arrangements and the organization's compensation philosophy. Individual placement within the range can then reflect defined factors such as relevant experience, scarce skills, credentials, performance history where appropriate, or other lawful job-related criteria. This does not guarantee that every pay difference is lawful, but it creates a system the employer can audit. Prior salary alone is harder to defend because it explains what a worker used to earn rather than why the current employer chose the present salary.
Pay Equity Review Should Test Current Explanations, Not Historical Labels
When employers review pay equity, they should ask why each material pay difference exists now. A statement such as 'that was the person's prior salary' may identify how the number originated, but it does not necessarily establish a lawful or appropriate justification under the governing equal-pay law. The review should test current factors such as seniority, merit, production, education, training, experience, location or another relevant criterion under the applicable legal standard. The precise defenses differ by jurisdiction, so employers should not assume that a factor accepted in one state will satisfy another state's statute.
A Strong Hiring Process Separates Negotiation From Historical Pay
Employers can reduce salary-history risk by establishing the approved range before interviewing, defining the factors used for placement, training recruiters to discuss expectations rather than prior pay, and documenting exceptions. Where local law allows voluntary disclosure, the organization can decide whether its policy will still avoid using the information except where legal review confirms a legitimate reason. This creates a more consistent process across hiring teams and makes later pay-equity analysis easier because the employer can reconstruct the current decision from job-related evidence rather than from an applicant's historical compensation.
Frequently Asked Questions
Does salary history always cause a pay gap?
No. The concern is that reliance on prior pay can preserve earlier differences. The actual cause of a pay gap must be assessed from the facts and applicable law.
Why not just give every candidate the same percentage raise over prior salary?
A percentage-over-prior-pay method can preserve an earlier difference and does not directly measure the value of the new role or the employer's current compensation structure.
What should employers use instead of prior salary?
Common alternatives include the approved salary range, job value, market data, location and documented candidate-specific factors that are relevant and lawful under the applicable jurisdiction.
Related Guides
Official Sources
Requirements and practices differ by jurisdiction and organisation. Check current local law, official guidance and professional advice for a specific situation.