At the annual meeting of the HR division at a consumer products company, the vice president of HR noted that pay compression was a problematic phenomenon for certain jobs for which there was high demand, but low supply. This problem was especially acute for jobs in information technology and software engineering. The vice president of HR has hired you as a compensation consultant to help the company formulate an action plan for dealing with this situation. What would you say in this situation about potential solutions to the problem?

Provide equity adjustments for employees hardest hit by pay compression

Explanation:

Pay compression is defined as a situation where employees earn similar salary regardless of their skills and experience.

In this situation pay compression will cause employee attrition because they are not satisfied with the compensation that is uniform to all employees.

To remedy this equity adjustments can be introduced for those hardest hit by the pay compression.

For example an information technology expert with 10 years experience will feel undervalued if he is on the same pay level as a new hire.

Equity adjustment is a salary change that is outside normal salary program based on promotion, reclassification, and merit.

This is used as a solution where retention of high demand staff required. A staff can be offered higher compensation to ensure they do not leave the organisation.

Higher compensation can be given based on tenure in a particular position