Which of the following is true of pay compression?
A) It is the process by which all employees' pays decrease 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 there is little difference in pay among employees despite differences in experience, skills, or seniority. It is often caused by external factors such as rising labor market pay levels that outpace pay adjustments for current employees. Option A is incorrect as pay compression does not necessarily involve a decrease in pay for all employees. Option B is also incorrect as it refers to "pay grouping" rather than pay compression. Option D is not entirely accurate as large pay differences may be a symptom of pay compression, but not necessarily its definition.

Which of the Following Is True of Pay Compression