Pay Compression

Summary Definition: When there's minimal difference in pay between employees regardless of their respective experience, skills, or qualifications.

What is Pay Compression?

Also known as wage compression or salary compression, pay compression happens when employees with different levels of skills, experience, or qualifications receive virtually the same pay. It's not illegal, but pay compression can be severely detrimental to employee sentiment and job satisfaction.

The most common causes include a lack of regular salary adjustments, higher starting salaries to attract talent, and limited salary ranges due to pay caps.


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