Which of the following is true of pay compression?
A) It is the phenomenon by which all employees' pay decreases significantly in an economic downturn.
B) It occurs when the employer groups employees with different pay grades together.
C) It is frequently a result of labor market pay levels increasing faster than current employees' pay adjustments.
D) It occurs when pay differences among individuals with different levels of experience and performance become large.

Question

Quizplus · Accepted Answer

Pay compression occurs when the labor market pay levels increase at a faster rate than the current employees' pay adjustments. This makes pay differences between new and old employees narrow or compresses them. Option A is incorrect because pay compression does not always occur only during an economic downturn. Option B is incorrect because grouping employees with different pay grades together is called pay mix or pay range. Option D is incorrect because pay compression occurs when the pay differences among individuals with different levels of experience and performance become small.

Which of the Following Is True of Pay Compression