Market factors, like the ones listed below, change over time and can inadvertently lead to pay compression. In many cases of pay compression, especially classic salary compression between new hires and tenured employee, the external labor market is to blame. While in most cases these inconsistencies are not deliberate, they can still be disruptive to your organization. If word gets out among your employees that these pay inequities exist, it can cause turmoil, especially among employees who are more skilled or have greater tenure in their roles than their peers. In highly skilled job families and departments with deep employee tenure, this can sometimes occur when employee salaries rise above those of low-level managers. Salary compression can also occur when individual contributors are paid more than their supervisors. When these market changes outpace merit and other annual increases, you may end up needing to pay more to attract a new candidate than you're currently paying more tenured employees in the same job in your organization. This often occurs when the market price for the job rises quickly, forcing employers to pay more to land qualified candidates than they had previously. Sometimes, new hires or employees with less experience may end up being paid significantly more than tenured employees with more experience. Pay compression, also known as wage compression or salary compression, occurs when employees with the same skills and experience are paid differently. It's time to get a better understanding of what pay compression is, how it can negatively affect pay equity and employee engagement, and how you can take corrective action to prevent it within your organization. Have you been wondering: 'what is pay compression?' It can be tricky to spot, even for seasoned HR pros.

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