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OPM offers guidance for agencies implementing salary history ban

Federal agencies will have until October to excise the solicitation and use of job candidates’ past compensation when setting pay for new hires.

The Office of Personnel Management on Friday set a deadline of October for agencies to comply with new federal regulations barring the federal government from using a job applicant’s salary history when setting their pay.

Earlier this week, OPM finalized regulations barring agencies from soliciting or otherwise relying on past compensation during the hiring and pay-setting process in most cases. The Biden administration also proposed similar rules this week that would ban the practice for federal contractors and subcontractors, though those would not take effect until at least April.

In a memo to agency heads Friday, OPM Director Kiran Ahuja said that while the new rules take officially effect April 1, the deadline for agencies to comply will not be until Oct. 1, due to the complexity of the changes required to update hiring processes.

“To accommodate the scope of coverage and range of agency policies and practices the final regulations will affect and to minimize disruptions to ongoing agency hiring processes where offers of pay have already been made to candidates, OPM is allowing additional time for agencies to implement the final regulations,” Ahuja wrote. “During this time, agencies should take steps to revise their policies and procedures. As soon as practicable, any new offers for employment including salary information for [General Schedule, Federal Wage System, administrative law judge, administrative appeals judge, Senior Executive Service, senior level and scientific and professional] positions and new pay-setting decisions for such positions should reflect the requirements in the final regulations.”

Ahuja reiterated her agency’s arguments in favor of banning the use of salary history during the hiring process, highlighting the practice’s role in buttressing pay disparities among marginalized groups.

“Salary history is not necessarily a good indicator of worker value, experience and expertise, and it also may contain or exacerbate biases,” she wrote. “Pay setting based on salary history may be inequitable, can perpetuate biases from job to job, and may contribute to a pay gap between the earnings of men and women. By eliminating a factor that may contain or exacerbate biases and that may be inconsistent with merit systems principles, the final regulations seek to promote pay equity consistent with [President Biden’s diversity] executive orders.”

OPM did establish one exception to the new ban: when a job candidate has a salary history within the federal government.

“Because structured pay systems minimize discriminatory influence on pay setting, OPM’s regulations are not banning consideration of prior federal pay when setting pay using flexibilities such as the GS maximum payable rate rule,” Ahuja wrote. “However, OPM’s new rule is requiring agencies to establish policies that further promote equity in pay setting using prior federal pay.”

Moving forward, agencies must use other methods, such as critical skills gaps in the existing workforce, in order to justify offering a higher salary than a position’s pay system would ordinarily provide, Ahuja wrote.

“If an agency seeks to set pay above the minimum rate of the applicable rate range under [a position’s] pay system, that adjustment must be based on factors other than a candidate’s non-federal salary history or the salary in a competing job offer (e.g., the success of recent recruitment efforts or significant disparities between federal and non-federal salaries for the skills and competencies required in the position to be filled),” she wrote. “The agency must also consider how pay has been set for employees who had similar qualifications . . . and have been newly appointed to positions that are similar to the candidate’s position.”