What is salary compression adjustment?

Wage compression, also known as salary or pay compression, occurs when newly hired, less experienced employees earn close to what current employees make. For example, say an employee hired 10 years ago was offered a starting salary commensurate with the market rate.

How is salary compression calculated?

To calculate the salary comp range, divide the actual salary of the employee you’re checking by the midpoint of the salary range and multiple that by 100, explains Salary.com.

Is salary compression legal?

Employers should be concerned because salary compression transforms the organization’s single largest cost (i.e., compensation) from a motivator into a “demotivator.” Moreover, while salary compression is not illegal, it is often accompanied by pay inequities that could violate equal pay laws.

How do you overcome pay compression?

Strategies to remedy pay compression

1. Maintain the compensation plan aligned with market.
2. Administer pay procedures consistently and adhere to plan control points.
3. Review pay differences between employees in the same or similar jobs for equity regularly.

Why do employers pay new employees more?

Employers often need to increase pay to hire experienced or in-demand workers when the need for workers outstrips the supply of available talent. At the same time, raises for current staffers may not have kept up. The disparity can also happen when companies use out-of-date data to set pay.

What happens when a new hire gets paid more than you?

What to do when new employees get paid more than existing employees

1. Evaluate the situation.
2. Remain positive and friendly.
3. Track your productivity and success.
4. Research fair earnings.
5. Wait for the right time to talk with your boss.
6. Boost your skills.
7. Expand your professional network.
8. Schedule an appointment.

How do I request a salary adjustment?

How to Write a Letter Asking for a Raise

1. Do your salary research. You’re not going to get very far if the amount you ask for is not in line with the realities of today’s job market.
2. Pick the right time.
3. Make the request.
4. Back it up.
5. Express appreciation for the consideration.

How do I decline a pay raise request?

1. Schedule a meeting in a private place. All the employees do not need to know that you are denying an employee a raise.
2. Get to the point quickly.
3. Explain briefly why you did not grant her the raise.
4. Allow the employee time to ask any questions he may have.
5. Encourage the employee.