K
Kathleen Martin
Guest
With companies finding it harder to attract new hires, many employers are agreeing to pay astronomical salaries for hard-to-fill positions.
“Many company-recruiting efforts are resulting in massive wage gaps,” says Adriana Herrera, founder and CEO, PayDestiny, a software company that helps companies share salary ranges with employees. For instance, she says, it’s not uncommon for a new hire’s compensation to exceed the salary of their boss, who has been working for the company for several years, especially if the new hire is taking a position that has been difficult to fill.
“The combination of a tight labor market, raising minimum wages, employees seeking to reset their careers post-COVID, and high wage inflation are all forcing employers to make higher offers to bring in external talent,” says Ruth Thomas, a pay equity strategist at Payscale. “This is creating pay compression and is a threat to pay equity internally.”
For smaller businesses and high-growth startups especially, the lack of standardized compensation formulas upend the salary structure, Herrera says. Without a formula that calculates a salary based on years of experience, skills, and level of education, the employer and employee are negotiating based on the candidate’s perceived value, which can be skewed in a tight job market, she says.
Companies that are using large wage increases to lure job candidates may discover huge pay gaps in their salaries at the end of this year, Herrera says.
In addition, employers who are inflating wages for hard-to-fill positions, potentially may have to limit pay raises for existing employees, says Andrea Derler, principal of research and customer value at people analytics company Visier. “If you’re an employee within an organization and you see people coming in with higher wages or you suspect it, it will not sit well with you,” adds Thomas.
Most employees already suspect they aren’t paid a fair salary. Only 37% of employees believe they’re paid fairly by their employer and nearly half believe they could make more money right now simply by switching jobs, according to a new survey by Employ’s 2022 Job Seeker Nation Report.
Continue reading: https://www.fastcompany.com/90745326/how-the-battle-for-talent-is-widening-the-pay-gap
“Many company-recruiting efforts are resulting in massive wage gaps,” says Adriana Herrera, founder and CEO, PayDestiny, a software company that helps companies share salary ranges with employees. For instance, she says, it’s not uncommon for a new hire’s compensation to exceed the salary of their boss, who has been working for the company for several years, especially if the new hire is taking a position that has been difficult to fill.
“The combination of a tight labor market, raising minimum wages, employees seeking to reset their careers post-COVID, and high wage inflation are all forcing employers to make higher offers to bring in external talent,” says Ruth Thomas, a pay equity strategist at Payscale. “This is creating pay compression and is a threat to pay equity internally.”
For smaller businesses and high-growth startups especially, the lack of standardized compensation formulas upend the salary structure, Herrera says. Without a formula that calculates a salary based on years of experience, skills, and level of education, the employer and employee are negotiating based on the candidate’s perceived value, which can be skewed in a tight job market, she says.
Companies that are using large wage increases to lure job candidates may discover huge pay gaps in their salaries at the end of this year, Herrera says.
In addition, employers who are inflating wages for hard-to-fill positions, potentially may have to limit pay raises for existing employees, says Andrea Derler, principal of research and customer value at people analytics company Visier. “If you’re an employee within an organization and you see people coming in with higher wages or you suspect it, it will not sit well with you,” adds Thomas.
Most employees already suspect they aren’t paid a fair salary. Only 37% of employees believe they’re paid fairly by their employer and nearly half believe they could make more money right now simply by switching jobs, according to a new survey by Employ’s 2022 Job Seeker Nation Report.
Continue reading: https://www.fastcompany.com/90745326/how-the-battle-for-talent-is-widening-the-pay-gap
