Pay Compression, Part I: What is Pay Compression?

All summer long we have heard the issue of Salary Compression and how this is/was a devastating issue that some constitutional offices locally are facing.

If you research the subject, speak to HR professionals, and talk with folks that have actually dealt with the issue--it is a pretty simple issue to define.  Solving the problem is a different matter altogether, though.

But what exactly is Salary Compression?

Salary Compression occurs in one of three workplace circumstances according to Mykkah Herner, compensation expert at PayScale. The hiring official and/or organization that is experiencing this phenomenon should ask themselves these three questions according to his article:

"Am I hiring people in too close to or higher than existing employees in the same role?  Pay compression in this case refers to bringing in new talent at a rate that is near or even above (also called inversion) employees who have much more experience in the role and often much more tenure in the organization.  Sometimes you just have to have that newest brightest talent.  Unfortunately, that can sometimes come at the cost of paying competitively for your existing talent.

Am I paying managers less than those they manage (unless that’s right for the role)?  Pay compression in this case refers to managers being paid at a rate lower than those that they supervise.  This may make sense in some technical roles where the market values the individual technical skills higher than management skills.  In most functional areas, however, it’s challenging to motivate a manager when they are being paid less than those they supervise.  As we move into an era where more millennials are entering management roles, this type of compression is especially troublesome.

Am I paying multiple levels of a job essentially the same thing?  Do you have an Admin Assistant 1, Admin Asst 2, and Admin Asst 3?  If so, are there clear differences between each level of the job?  I’ve worked with many organizations that fail to differentiate the jobs, merely creating multiple levels so they can create a sense of mobility.  While it’s true that millennials, and in fact most other employees as well, like to be promoted, they also want to feel a substantive change to both the nature of the job and the compensation associated with it as well."

I know a little about compression because when I served as a school board member here in Escambia County for a decade, we had a significant issue with salary compression--and we addressed it....

It took time, money, patience, and a willingness to negotiate with the relevant bargaining group (s) and to commit to structured pay increases up and down the pay scale.

It was not an overnight fix.  It took several years.