Answer to Question 1
Answer: A compensation survey is a means of obtaining data regarding what other firms are paying for specific jobs or job classes within a given labor market. Virtually all compensation professionals use compensation surveys either directly or indirectly. Organizations use surveys for two basic reasons: to identify their relative position with respect to the chosen competition in the labor market, and to provide input in developing a budget and compensation structure. External equity exists when a firm's employees receive pay comparable to workers who perform similar jobs in other firms. Ideally, compensation will be evenhanded to all parties concerned and employees will perceive it as such.
Answer to Question 2
Answer: Salary compression occurs when less experienced employees are paid as much as or more than employees who have been with the organization a long time due to a gradual increase in starting salaries and limited salary adjustment for long-term employees. As workers discover inequities in their pay, resentment and lower productivity may follow with the employees ultimately leaving the company when the economy improves. The solution to salary compression is simple; unfortunately, the solution usually requires money, which is limited for most organizations. A company may build in compression funding to any annual budget increases. Another way to remedy salary compression is to focus a primary portion of raises to your best employees and not waste compensation on across the board adjustments.
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