Pay Compression

Definition

When salary differences between experience levels become too small, creating frustration among senior employees earning barely more than new hires.

Example Usage

We've experienced pay compression because new hires' market rates caught up to existing employees' stagnant salaries.

Origin

Compensation management term from 1980s onward

Fun Fact

Pay compression is rampant when companies don't conduct regular market analyses and leads to resignation of experienced staff.

Source: Compensation Management Practice

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