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Salary Compression

definition, synonyms and explanation


What is Salary Compression

In salary compression, workers at the bottom of an organization's pay scale receive relatively high wages while workers at the top receive relatively low wages. This results in a smaller range of salaries between the highest and lowest paid workers.

Salary Compression explained

In human resources, salary compression is the phenomenon of pay rates for certain positions within a company being lower than the pay rates of similar positions in other companies. This can happen when a company is first starting out and they cannot yet afford to pay their employees as much as other companies can. It can also happen when a company is going through financial difficulties and they need to cut costs. Either way, salary compression can cause morale problems within a company, as employees may feel like they are being underpaid compared to their counterparts at other companies.

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