To attract top talent, employers often pay new hires more than they pay existing employees in equivalent roles. This isn’t new. But today, regulatory changes and technological advances have dramatically increased pay transparency in many sectors, making employees more aware of these pay disparities. Moreover, data from the U.S. Chamber of Commerce indicates that the workforce is expected to shrink in 2024, while a global survey of more than 30,000 employees found that salaries are expected to increase by an average of 4% in 2024, suggesting that these pay gaps will likely continue to expand.
When New Hires Get Paid More, Top Performers Resign First
Research shows that unaddressed pay gaps will push veteran talent to find new jobs.
March 05, 2024
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Summary.
To attract new talent, employers often offer new hires higher wages than existing employees. But today, a combination of regulatory changes and technological advances have dramatically increased pay transparency in many sectors, making employees increasingly aware of these pay disparities. How do existing employees (and especially top performers) react to these higher-paid new hires? And how can organizations mitigate the associated risks? The authors’ recent research shows that unless employers adjust existing employees’ wages soon after making a new hire, employees tend to resign — and that top performers tend to resign faster than others. As such, employers should be aware of the impact hiring higher-paid external talent can have on their teams, conduct regular pay equity analyses to ensure that any disparities are fully explainable, and develop the agility necessary to adjust wages as soon as any inequities are identified.