Salary compression occurs when there's a small difference in pay between employees regardless of their experience, skills, or position level. A healthy salary differential typically ranges from 20% to 40%.
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Industry research shows that maintaining a 20-40% salary differential helps prevent turnover and maintains team morale.
Consider team size and structure. Larger teams may need wider salary bands to accommodate various experience levels.
Review compression ratios quarterly, especially after new hires or market changes in your industry.