Pay Compression

Posted in Human Resource Terms, Total Reads: 822
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Definition: Pay Compression

Pay compression is the concept in an organization where the employees have more or less a similar salary irrespective of their age, experience, profile etc. Even those employees who have a better skill set or have been with the company longer, have a slightly higher salary package.


The major problem of this phenomenon is increased turnover where the long term employees feel a sense of inequity and walk away from the organisation with all the knowledge and expertise they have acquired over a period of time.


In order to tackle this, most organisations follow the method of “equity” adjustments only for selected highly valued employees who are a victim of pay compression.


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