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Definition

Salary Compression

Salary compression refers to a salary inequity problem, generally caused by inflation, resulting in longer-term employees in a position earning less than workers entering the firm today. It  means longer-term employees salaries are lower than those of workers entering the firm today, and is a creature of inflation. Prices (and starting salaries) go up faster than the company’s salaries, and firms need a policy to handle it. 

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