Pay compression, where newer or lower-level employees earn close to or more than experienced staff, is exacerbated by economic uncertainty, pay transparency laws, and inflation. Addressing pay compression is vital for retaining talent and avoiding legal issues. Organizations should proactively tackle pay compression by adjusting pay structures, providing total rewards statements, and educating managers on pay communication. Incorporating updated market data and addressing pay inequities during budgeting can prevent further issues. Payscale offers tools and strategies to help organizations manage pay compression effectively.

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