What to Do When New Hires Out-Earn Current Employees

In a tight job market, competition for highly skilled workers can be fierce as candidates have their choice of opportunities and command a higher salary, so you may end up paying a premium for top talent.  

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This can leave employers with a problem; your current employees WILL find out what you are paying the new hire, which can create discord in your organization. 

How to handle this situation

First, take a look at the factors that might justify salary differentials.  Longevity is not one of them unless it is tied to skill level. 

This means you might want to have salary bands with salary ranges for different skill levels, to help you to justify any salary differences.

Next, conduct a salary audit for current employees and see where they fit into the job bands.  An audit affords employers the opportunity to examine and document various circumstances which may justify pay differentials. Make adjustments as needed.

If you do hire someone at a higher salary because they have higher skills, meet with current employees to discuss the levels. 

Finally, put together corrective actions and preventative measures to avoid pay compression issues in the first place.  Hiring is often where salary disparity begins. If left unaddressed, resentment from lower-paid, existing employees could damage your team and result in turnover.