InstituteCompensationIn Depth Sub Topics (Level 4)Associate Benefits & CompensationCompensationBroadbandingUSAEnglishAnalysisFocus AreaHuman Resources
Pay compression
['Compensation']
- When pay rates within a range don’t vary much, this is considered pay compression and organizations should reevaluate employee pay.
When the differences in employees’ pay rates within a range do not vary much, it is known as pay compression. There may be someone with seven years’ experience who is paid $15.50 an hour working with someone who has only two years’ experience who is paid $15.00 an hour. This can result from raising starting salaries without adjusting those of current employees. There may be other causes as well. In this situation, pay adjustments should be considered.