Addressing Pay Parity
Pay Parity is a common issue in this current low unemployment job market. Often times, external asking salaries may be higher than a company’s current salary level. Consequently, to be competitive employers must offer higher salaries to attract new candidates. The result, if an employee has been with a company for years, their pay may fall below the external market.
Typically, what co-workers make isn’t as secret as managers might hope it is and that means paying new hires more than current employees can create morale issues. However, it is important to not over-correct with unnecessarily broad pay adjustments.
Addressing Pay Parity
Before taking measures to address pay parity, it’s important to determine whether a particular situation represents a broader issue or is an isolated incident. For instance, for new hires with a much-needed skillset, it may be appropriate to start them at a higher pay range.
Specific, short-term project requirements may also lead to pay parity. In that situation, a new employee may be coming on board to manage a project that will last for a limited time and then leave after the project is finished.
Isolated instances of pay parity may not warrant department-wide salary increases. However, if a company is consistently paying new hires more than current employees, it’s time to evaluate:
- Whether the company is using the right market data to determine pay levels.
- Whether existing pay ranges are still appropriate given the current talent requirements.
Pay Parity Fixes
Raising pay through a series of small, more-frequent increases can keep compensation in sync with current market conditions.
Other steps to relieve pay compression include:
- Offering hiring bonuses to new hires instead of raising the position’s base salary.
- Awarding spot bonuses to reward contributions.
- Providing more employer stock to reward long-term workers, such as restricted shares that vest over time.
If you’re looking to hire a finance professional, the DLC Group Salary Guide has the compensation trends that will keep you competitive. Salary ranges, insight into the latest perks, hiring trends, etc.…