Pay Compression

Running Head : Pay Compression

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Pay Compression and Its Effects on Corporations Today

Pay compression refers to the decreasing wage gap between people on the same job grade in a hierarchical organization (Manny , 1999 . This phenomenon affects a wide spectrum of organizations whether public private , large or small . Four aspects of pay regression will be addressed in subsequent sections of this , they include : how it affects organizations how they deal with it and will provide alternative ways of compensation in to avoid pay

compression issues . The affected employees usually happen to be the ones that have worked in the organizations for long durations of time . As if to ridicule seasoned employees , new workers could sometimes get bigger starting salaries than old employees . Such an effect of pay compression could adversely affect morale of season employees who in many instances happen to be most productive , whose result would be reduced morale

As it happens in many industries , the employees end up looking for jobs with competitors . The affected company thus faces the danger of being out competed by rivals using the very labor it took years to train Companies could end up using extra resources to re-attract same workers back to the company - a common trick that has been used workers who had been in the affected company 's leadership positions . In such a case companies are forced to recognize competencies of the workers they had ignored previously . If department heads leave the company as a result of salary compensation , their team members could also be demoralized and make it hard for the company to retain experienced staff . Hiring new employees will further cost the company money and resources that could have been used in other productive activities . Sometimes pay compression protests could lead to disruption of company activities , especially when unions are involved . This could lead to serious impact on company operations when it takes time to solve the problem . Another problem with this phenomenon is the difficulty of hiring new staff . Prospective could be taken aback by the pay range within the organization compared with competition , which could lead to the preference working with rivals Owing to such dangers in organization 's wellbeing , it is vital for Human Resources Managers to constantly keep close eye at the existing pay ranges . Failure to take action or piecemeal solutions end up digging respective companies into the mess of such a sorry situation

How Companies /Corporations Are Dealing With Pay Compression

Individual companies develop different measures to address their pay compression problem depending on their specific situation and industry requirements . The transition between the end of compression and the new system is usually drastic . Companies end up using a lot of money in the process . To escape such a situation , it is advisable for companies to start early reforms before workers ' demoralization begins . Some companies prefer creating positions in the company hierarchy that will give a chance for leaders at the top of hierarchy more challenges...