Wage difference between new and existing employees: a delicate balance

Do you think that your salary is fair? Or the salaries that you pay to staff in your company or organization? 

With skills shortages seen across many industry sectors, most job markets are currently candidate-led, and as a result salaries are rising as organisations scramble to attract the best hires in shrinking talent pools. This has led to a new challenge for many employers: managing the effects of wage disparities between existing and new employees. 

Say you joined the marketing team of a company five years ago, when your job market was a bit less candidate-driven. Your salary will likely have risen at a rate comparable with the standard local inflation rate – a few percent points per year, maybe. Salaries for new hires will have risen at a much faster rate in that period of market change, meaning that a new hire doing the same or a similar role is likely to be on a higher salary than you. 

They may not have precisely the same job title or job description – in some countries and regions it would be legally dubious, as well as potentially unethical to have two people in precisely the same role on different salaries – but they may be performing a directly comparable function, but for a different wage. 

This can create delicate staff management issues for companies, as well as issues with staff retainment and internal salary management. 

 Managing the issue 

This wage disparity issue can potentially create big HR and management problems. For small or medium sized companies, the effect might not be so great, as there will likely be fewer roles that are extremely similar in terms of job descriptions and titles. But if you’re a huge global multi-national, having to explain to the employee with 20 years of experience in your company why someone new in the company is getting a higher salary than you could potentially be a common problem. 

If your company has soaring profits and strong long-term growth forecasts, maybe it’s not a problem to just up your annual salary raises for existing staff and bridge the gap there. But for most companies, rampant wage increases across the board won’t be an option. In these cases, there is no simple solution, and it’s often about managing the effects of such salary distances rather than eradicating them completely. 

It helps to have a positive work culture beyond salary, and implement the kinds of wellbeing and flexibility measures that we at PageGroup’s various divisions talk to clients about regularly. For many people being able to work from home, at least partly, is as big a factor in job satisfaction as having a competitive salary, as is wellbeing derived from a company having a positive ESG footprint, for example. 

However, it is managed, it’s vital to keep on top of current salary expectations, norms and changes, on a deep level. 

 Understanding salaries 

If you’re going to manage the effects of any salary differentials within your company, derived from the swift market changes and candidate-led nature of sectors in recent years, it’s important to be plugged in to salary norms and expectations. 

A lot of our clients come to us to better understand and deal with this problem, seeking to assess the realities of salaries in the markets they work in. We provide them access to our deeply-researched, up to date salary survey data, and they can quickly discover whether their existing and new staff are being paid at the correct level. Or, if they need to take salary action to become more competitive when hiring and retaining staff. 

Even if they cannot simply hike up salaries hugely for existing and new hires, this data can help them craft and assess the overall packages they are offering staff. How does their salary sit, when considered alongside their work processes, culture, retirement plans and other benefits – is it all aligned with the market? 

Access to this kind of deep, current data and expertise is vital when assessing your overall packages, and helping you manage any effects of salary differences. Get in touch with me if this is something you and your company would like to know more about.