“The company has hired an employee who has a profile similar to mine; but he’s getting a better compensation”, Common Questions and Answers of a Modern Office.

QUESTION:  The company has hired an employee who has a profile similar to mine; but he’s getting a better compensation. I think my company does not care about its existing employees.

REALITY:     The new hire placed in the same salary band may get a better salary; but it could also be that he is not giving the right salary information.

Sometimes, news leaks out, even before the management is prepared, that the company has hired a new hand.

            If employees find out that the new hire is getting less than them, then there is no issue. But if they find out that he is getting more, then the tone of discussion changes, and statements like, ‘new people are preferred to the existing ones’ can be heard.

            An employee has to determine whether he is happy with his current salary or not. If he’s not happy then he should approach his manager to seek a review. It is the manager’s job to be able to justify the salary level he is receiving, irrespective of others in the company. The company decides the salary band in which a person should be placed. In each salary band, a manager looks at comparable existing employees. On getting a few data points from internal records and after being informed about the level of salary that the candidate had drawn previously, the manager decides upon the salary package. The salary offered may not be exactly the same as that drawn by existing employees. The manager should not disclose the salary of the new person, but should at least look into the existing employee’s request. If the difference is within the ‘smoke’ level – that is, if the difference is minor from the manager’s and HR’s perspective, it does not require any correction. However, if there is any discrepancy, then the manager should take it up and rectify it with HR’s help. The manager must close the loop with the employee by providing the right answer.

            But most of these issues happen due to a misunderstanding based on partial information. The new employee might have added one-time components (like relocation allowance, join-in bonus or retention bonus) or a few other benefits (treated differently in different companies) in communicating his salary; these components are not normally considered part of the salary. Or it could be that he has been taken on a higher salary purposely as he might not qualify for the next salary hike which is imminent. Half-cooked information only leads to more doubts, confusion and dissatisfaction. It could also be true that in a few cases, a person gets hired at a higher salary which gets corrected over a period based on performance.

WHAT CAN YOU DO AS THE EMPLOYEES? If the issue is really bothering you, then you should take it up with the manager. Before approaching the manager, you should have the right set of data to prove your point. It is possible that you might be a victim of partial information, leading you to believe that you are underpaid. If you’re not sure, you should be suave in presenting your case to the manager. At some of time, you need to trust your manager even if the response is contrary to your expectations.

WHAT CAN YOU DO AS THE MANAGER? Together with HR, you should put the right effort into deciding the salary level of the new hire. Internal parity is important. If, for some reason, you have to pay a higher salary to a new hire, then be prepared to justify this if any questions are asked. In the next salary-hike cycle, you should sanitize the difference, if any, based on employee performance.

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