Salary Compression

Posted in Human Resources Terms, Total Reads: 10014

Definition: Salary Compression

Salary compression is an issue in difference of salaries caused by inflation, wherein newly joined employees earn more than the previously employed & more experienced employees.

This creates a sense of unease and loyalty breach among the existing employees as they feel betrayed by the company. There is a feeling of being cheated as the new joinees get more wages as compared to them despite their experience and expertise on job.

Salary compression can be regulated by giving certain benefits to existing employees, considering their promotions, rethinking the pay structure etc. This would ensure their faith in the system, and they would remain committed to the organization.

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