April 20, 2023 — Two years into the Great Resignation, companies have chased wage growth and exacerbated pay gaps by paying new hires more than tenured employees, according to new research from Syndio, the world’s leading workplace equity analytics platform. In 83 percent of high-paying job groups, defined as those with an average salary of $125,000 or more, tenured employees tend to not make more than new employees. In fact, 30 percent of the time, they actually make less.
However, loyalty does pay for three-quarters of job groups paying $75,000 or less (77 percent). Based on Syndio’s analysis, jobs at the lower end of the pay spectrum — like retail, manufacturing and other frontline jobs — continue to pay more for tenure compared to new workers. It is the opposite for corporate support roles, such as HR, Finance, Marketing, Analytics, and IT. In 55 percent of these job groups, new hire pay is very similar to pay for tenured employees. In one position we analyzed for a mid-level professional job group, we found the lowest pay went to people who were 2-4 years into the position — they make 4.4 percent less than their peers.
Employers are tightening budgets while the labor market remains hot, which is creating a challenging environment to attract and retain employees. The addition of pay transparency laws sweeping the country – which require employers to post pay ranges on job descriptions – means employees will be more likely to recognize any pay disparities that result from the combination of a competitive labor market and tighter budgets. This “perfect storm” of factors could create headaches for employers as workers realize newly hired peers are earning more than them.
“An organization may want homegrown talent, they may value the fresh perspective that external hires bring, and they may want a mix. All of these approaches are valid. But the reality is that we’re in the pay transparency era and salary ranges are out in the open. Companies have to be prepared to publicly explain why there may be pay gaps between tenured and new employees,” said Chris Martin, Research Economist at Syndio. “Remember, with pay, perception is reality: how employees feel about their compensation impacts their satisfaction with their employer and their desire to stay.”
Syndio looked at gender-based pay equity analyses conducted over the past year from 48 organizations, representing 786,000 employees across 1,716 distinct job groups. Pay equity analyses include neutral, job-related controls that can explain differences in pay — like location, management responsibilities, and tenure. In the analysis, job groups are composed of similar roles, meaning those requiring similar skills, effort, responsibility and working conditions. The focus of this research was to look at the pure impact of company tenure for employees who are otherwise similar, and whether staying at a current employer can provide more or less earnings than leaving, assuming the employee lands the same role either way.
View the complete analysis and methodology on Syndio’s blog.