Factors Leading to Wage Compression
Wage compression stems from a variety of causes, many of which are sustained over a few years. The most common causes include the following:
Companies have policies to pay new employees more because they bring expanded knowledge about competitor's strategies, new prospective clients, additional relationships, new ideas and more.
Overlooked and outdated HR pay regulation policies that result in new hires being paid more than experienced workers
Improper integration of employees and pay following a merger or acquisition
Departmental differences in salary increases and adjustments, promotions and bonuses
Outdated internal compensation structure that is out of alignment with the external market data
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