Pay Compression

 Pay Compression (excerpt from today's email newsletter (delivery scheduled for 11:20am PT today) -

For those of you who are frustrated with your compensation (notably salary), you need to understand the terms “pay compression” or “wage compression”. Basically, these terms can be defined as when either newly-hired and / or less experienced employees are offered higher compensation than incumbents holding the same role. Many companies (esp. Silicon Valley firms) are guilty of these practice. Several causes:

 

Tight Labor Market – Basic Supply / Demand Economics

Outdated Salary Administration Programs

Companies want New Experienced Workers from Competitors / Other Industry Firms. 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.

Improper integration of employees and pay following a Merger / Acquisition

Inflation

 

Think about these issues and if you feel you may have become a victim of pay compression, especially if you have been with the same company for 3+ years, then you probably are right. The best way to combat pay compression is to take advantage of this knowledge and make yourself “available for new opportunities” and start NETWORKING!