Pay Compression is a measure of how much an individual's salary is compressed compared to the pay structure of the organization. It is calculated by comparing the individual's salary to the pay structure of the organization.
Analyze salary differences within a grade to identify potential compression issues
Pay compression refers to a situation where there are very small salary differences between people in the same grade regardless of their performance, experience, or tenure.
This calculator measures compression using the coefficient of variation, which indicates how dispersed salaries are within a grade. A lower percentage indicates higher compression.
To calculate grade compression, enter all salaries for employees in one grade. Add or remove rows as needed for all employees in that grade level.
Pay compression under 5% is considered severe and may lead to retention issues, especially for experienced employees who see little salary difference from new hires.