Episode 20: Pay Compression
How Do New Hires Pay Rates Catch Up to Tenured Employees?
What happens when the new hire starts making almost as much as the employee who’s been there for six years?
That’s pay compression—and it’s one of the most common and emotionally difficult compensation problems organizations face.
In this Season 2 finale of What the Comp?!, Jennifer Loftus explores why new hire pay can slowly catch up to—or even surpass—the pay of experienced, tenured employees.
Jennifer breaks down why compression happens, how organizations can identify it earlier, and why it needs to be treated as more than a math problem.
You’ll learn:
- Why external market pay can move faster than internal employee pay
- How aggressive new hire offers can create unintended internal equity problems
- Why hiring decisions should be reviewed against current employee pay before an offer is finalized
- How small promotional increases can contribute to compression
- Why simply being “within the salary range” doesn’t guarantee a fair pay relationship
- How to distinguish true compression from general pay dissatisfaction
- When organizations should proactively review compression
- Why waiting until employees complain makes the problem harder—and more expensive—to fix
Pay compression isn’t the new hire’s fault.
It’s often the result of hiring decisions, merit increases, promotions, budgets, market movement, and retention decisions being made separately over time.