pay parity

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.…



When is it Time to Raise Employee Salaries?

When employees quit, there is an inevitable disruption in productivity. Other employees will be pulled away from their tasks to fill in the gaps until you find a replacement; when you do hire a new employee, they will need time to learn your business.  Maintaining employee morale, keeping productivity high, and reducing turnover are important to keeping your business running smoothly. A crucial part of employee retention is routinely reviewing your company’s compensation packages and awarding raises as  the market demands. Competitive salaries can be key to encouraging employee loyalty, as it shows them how much you appreciate their efforts.  If you are looking for the right time to increase employee salaries, here are some tips to consider.

The Company is in Good Financial Health

If your company is experiencing noticeable success,  it is be a critical times to reward your employees with a raise.  When your company is doing well, the employees also know it.  Failure to consider this factor may cause employee morale to quickly plummet.

Employees are Asking for Raises

While a single employee asking for a raise may not be indicative of your employees’ satisfaction with their pay, you should pay attention when you get requests from multiple employees.

There is an Increase in Responsibilities

It is often incredibly important to recognize when you have employees that go above and beyond their normally required work. Additionally, if you have employees that have started to take on additional roles so regularly that you might think that they are just doing their job, it’s probably time to consider giving them more money. Responsibilities can also increase as a company matures. Just ensure that you aren’t asking people to take on more for the same amount of money.

Employees are Leaving for Similar Jobs With Higher Salaries

Occasionally employees find positions that are better suited for them with another company, and there is just nothing that you can do. While these moves are often out of your control, be mindful of why they are leaving. If employees regularly reference better pay in their exit interviews, it may be time to roll out the raises.

Salary can be a complicated issue to negotiate for employees. Hopefully, considering some of these factors can help make that decision easier for you to manage.


For more employer tips, check out Why Are Employees Quitting?