Question

8-5. Compression represents a serious dysfunction of pay structures. Discuss some of the major ramifications of compression. Also, discuss how companies can minimize or avoid these ramifications.

Answer 1

Problem of Compression refers to the inequity in the pay structure of employees who are working for same organisation. it has been seen that during the inflation where cost of living increases, the new inducted employees are paid higher salary but empployees who are already experts and working for same organisation are not given hike. In this way, unequal pay structure develop in organisation.

It has various negative repercussions for an organisation. Employees who are being paid low either leave an organisation or become less attentive towards the work. This problem can be delt by giving salary hike to employees who are most valuable. If such employees leave organisation with knowledge or expertise, competitor may gain edge over this organisation. Hence, employees who have gained enough expertise must be paid equitably.