When candidates apply for a new role, their worth should be evaluated based on the skills, experience, and value they bring to the position—not their previous salary. Yet, many employers still base job offers on what a candidate was making in their previous role rather than what the new position is actually worth. This outdated practice not only undervalues talent but also perpetuates wage gaps and hinders career growth.
The Problem with Using Previous Salary as a Benchmark
Using a candidate’s past salary to determine their future pay creates a cycle where employees, especially those from historically underpaid groups, remain stuck earning less than they deserve. It also ignores the realities of career progression—just because someone was underpaid in the past doesn’t mean they should continue to be.
Furthermore, a person’s previous role may have had fewer responsibilities, different industry standards, or limited growth opportunities. If a company is hiring for a role with higher expectations and more impact, they should compensate accordingly. Paying based on past earnings rather than the job’s actual value leads to:
- Unfair wage stagnation – Employees who were previously underpaid continue to earn less than they should.
- Inequity in hiring – Women and minority groups, who statistically tend to be underpaid, are disproportionately affected.
- Talent loss – Companies that lowball offers risk losing top talent to competitors willing to pay for value, not history.
A Better Approach: Pay for the Role, Not the Résumé
A fair and competitive hiring process should focus on the candidate’s qualifications and the market rate for the job they are stepping into. Employers should:
- Use Market Data – Compensation should be based on industry standards, location, and demand for the role, not what a candidate previously earned.
- Evaluate Skills and Experience – Employers should assess a candidate’s capabilities and what they bring to the role rather than anchoring to past salaries.
- Promote Pay Transparency – Clearly defining salary ranges in job postings helps set expectations and ensures fairness in compensation discussions.
- Offer Competitive Pay – Paying candidates what the job is worth not only attracts top talent but also increases retention and job satisfaction.
Why This Matters for Businesses
Companies that prioritize fair pay create stronger, more motivated teams. Offering salaries based on the actual job, rather than past earnings, leads to better employee morale, higher productivity, and a reputation as an employer that values its workforce. In an era where workers are demanding fairness and transparency, businesses that fail to adapt risk losing out on top talent.
By breaking the cycle of pay inequity and compensating candidates for the role they are stepping into, companies can build a more equitable and competitive workforce. It’s time to shift the hiring mindset—pay for potential, not just for history.