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Working With Pay Compression

About 56% of employers in the United States have experienced pay compression in the last 12 months, research by the international staffing and consulting firm Robert Half reported has found.

Pay compression takes place when a new employee is paid nearly the same as or more than a longer-service employee in the same role.

Of the more than half of employers who said they saw this happening over the course of the past year, 62% are regularly reviewing compensation plans and increasing salaries for existing employees, when appropriate, to align with current market rates.

“Market conditions have shifted dramatically, and savvy employers are stepping up to address salary gaps and ensure all employees are being paid fairly,” said Robert Half senior executive director Paul McDonald.

“They know that taking a cautious ‘wait-and-see’ approach on compensation is risky and can lead to the loss of great talent.”

There are several factors at play when it comes to wage growth, and employees’ expectations are among them. In a separate survey of more than 1,000 U.S. workers, one-third of respondents (34%) said they have not had a raise in 12 months and another 16% received one but were disappointed with the amount.

Nearly two-thirds (62%) of employees plan to ask for a raise this year, with the top reasons being: to adjust for the higher cost of living (30%); to reflect current market rates (23%); and to account for additional job responsibilities (22%).

If workers don’t get a raise this year, 31% say they will ask to revisit the salary conversation in a few more months, while 27% say they will look for a new job with higher pay and 23% are intending to ask for more perks.

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