Question

At the annual meeting of the HR division at an insurance company, the vice president of HR noted that pay compression was a problematic phenomenon for certain jobs for which there was high demand but low supply. This problem was especially acute for jobs in actuarial science and legal services. The vice president of HR has hired you as a compensation consultant to help them formulate an action plan for dealing with this situation. What would you say is the best solution to this situation?

Answer 1

Prepare high performing employees for promotions to jobs at higher salary levels.

Step-by-step explanation:

Pay compression occurs when there is little difference in pay between employees regardless of experience and skill they possess. This leads to low motivation ong employees to perform above others since compensation is the same.

In the given instance this is the problem in actuarial science and legal jobs where there is high demand and low supply of talent.

To remedy this there needs to be a framework to compensate high performers.

Promoting them to jobs that have higher salary will be a great way to recognise and motivate high fliers