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July 2011:

Experienced vs. Inexperienced Employees — Managing the Pay Gap

By Claudia Jones

July 5, 2011

Posted in: News

Attracting new talent, and retaining experienced and knowledgeable employees, has always been a challenge for organizations. In an effort to fix this ongoing problem and to keep a competitive edge, companies often choose to recruit new talent — at a higher price tag.

This trend of high-dollar recruitment has resulted in a narrowing pay gap between those with many years of related company experience, and those who have considerably less experience. Employers are hopeful that the expense of hiring employees at a higher price point will generate an influx of cutting-edge knowledge and ideas needed to propel the company forward.

The issue of whether the greatest value lies in attracting fresh talent or whether it lies in retaining those already employed by the organization will always be an ongoing debate. Talented employees who are engaged help in generating the financial outcome many companies desire.

This appeal to an organization’s brand is varied by generation and requires research by the employer. Employers must be able to objectively assess their organization to determine why an individual would want to join, and stay a part of, the organization.

Salary Structure

To appeal to job seekers, companies must continuously re-evaluate and invest in their recruitment practices, compensation and reward packages, and short and long-term incentives. Many companies are desperate to attract the attention of the most talented job seeker.

As a result, pay compression has become an issue at all levels. This occurs when less experienced employees earn as much as (or more) than longer-term employees due to recruitment at a higher starting salary. This is an issue that can quickly escalate to becoming an Equal Employment Opportunity Commission complaint if other employees are knowledgeable about the variances and perceive it as discriminatory.

An employer should be able to substantiate the reason for a broad range of salaries within a certain level of the organization. These variances in pay can occur for many reasons, but should be assessed at least biannually.

To resolve such discrepancy in pay issues that have resulted from compression, companies sometimes seek out assistance in re-evaluating compensation by redesigning pay structures and linking performance with merit. Organizations should also have steps in place to ensure those with the greatest experience and skills earn more than the average, and should continually evaluate whether their organization’s compensation is at (or above) market level.

Increasing merit pools, creating incentive programs and providing employee development can support career progression and promotion of those within the organization. This can offset the negative stigma that results from compression. Taking such steps can redirect any negative impact into a positive outcome for the organization — helping to bridge this pay gap.

Employee Retention

The immense cost to the business can quickly add up when there is a failure to retain the knowledge of the organization. Companies have to continuously appeal to those already onboard and should assess perspectives from employees on pay and rewards, career opportunities, development and desired company culture. The pay and other benefits must be competitive to keep employees onboard and to maintain a positive organizational culture.

Conducting regular employee surveys helps identify positive and negative employee perceptions about the organization and can help companies anticipate possible changes or turnover. The positive feedback helps companies to better support the initiatives that work well for the organization. Identifying negative trends can bring focus to underlying problems related to turnover, management issues or potential crises that will eventually impact the client base.

Employees are engaged when they are committed to doing their best work and have an intense desire to stay connected with the company. Employers need to assess by generation the perspectives on pay, career opportunities and development. To hold on to these valued employees, organizations must conduct surveys to constantly reassess the needs of their employees and respond to the results of these surveys.

Paying to keep experienced workers onboard is worth it for the organization. When a key employee leaves the company, the expert knowledge gained during the past several years leaves as well. Recruiting new talent is not a quick solution, since it can take years to infuse the critical knowledge developed on-the-job.

Although it eventually becomes inevitable that all employees will leave the organization, companies must take responsibility and create an organization that strives to keep valuable knowledge and experience in the door. It is crucial that skills and knowledge are transferred from more tenured employees to those who are new to the organization. The costs can be as high as tens of thousands of dollars to replace knowledgeable employees.

Periodically Reassess

When employees are satisfied with the company and their jobs, it is reflected in low turnover rates. A company will reap the maximum benefit when it ­manages to continuously appeal to its current employees and has the compensation and other programs implemented. When companies do not have both the intangible and tangible rewards that job seekers and current employees expect, there is no attraction for the outsider and the employees quickly become disengaged.

The right type of survey can reveal focal issues that can be rectified before they become a problem. When organizations are forced to bring in less experienced employees at higher salaries, it can still be a win for the organization, its current staff and those newly hired.

An effort must be made to offset the impact by periodically reassessing the compensation of the entire workforce and implementing other bonus, merit and reward programs in order to bridge the pay gap.

Claudia Jones, PHR, is an HR consultant with Berkshire Associates in Columbia. She can be contacted at 800-882-8904, ext. 1232 and

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