A: It can be demoralizing when an employer offers a bigger salary to someone who will have the same role as you, but it’s not unusual. For some jobs, the external market value increases faster than company salary levels, so employers must offer more to recruit such candidates, says Barbara Vietor, a compensation consultant in San Francisco.
“If you have been there a couple of years, your pay can fall behind the external market,” Ms. Vietor says. “You could earn $80,000 but the company needs to offer $90,000 to get a new person.”
Sometimes, applicants can demand more because they have skills current employees lack, says Fred J. Eck, director of human resources at CDO Technologies Inc., a consulting firm in Dayton, Ohio. This is common in technical or engineering fields, says Mr. Eck. Younger hires might earn more than older, more experienced employees since they have more up-to-date knowledge and skills, he says.
Skill shortages also cause external pay to rise. This is currently true for financial professionals and nurses, who are being paid more than existing staffers to join organizations, says Ms. Vietor.
Typically, what staffers make isn’t as secret as managers might think it is and that means paying new hires more than current staffers can create “some employee relations issues,” says Mr. Eck. He advises meeting with your supervisor to ask why the new recruit earns more. Your boss may say the increase was justified to attract someone with skills the company needs.
Before the meeting, review the company’s compensation philosophy, which often is stated on its Web site or employee handbooks, says Ms. Vietor. This can tell you whether the company’s intent is to reward performance and whether it matches or pays more or less than market to attract new people.
Ask what you need to do to increase your pay commensurately. You may need to learn a new skill, participate in more difficult projects or get involved in other activities. It’s crucial to always speak in terms of your value and not about fairness. Try to make an agreement with your boss on goals and outcomes, such as a performance review in three or six months to assess your progress. It’s possible that your performance hasn’t met expectations and that you need to work on it.
“If you get the added knowledge and improve your performance, hopefully it will be recognized in your next review or salary adjustment,” says Mr. Eck.
Some companies want to improve pay for current employees after bringing in higher paid candidates but their hands are tied because they lack funds to award increases or because company policies allow them to only do so at certain intervals. In these cases, employees need to be patient. “Companies often don’t have the cash to fix it right away,” says Ms. Vietor. “It may take time.”