Equity & Compliance
Internal equity
Also called: internal pay equity
The principle that pay differences inside the organization should reflect legitimate differences in scope, level, performance, or tenure.
Internal equity is the discipline of keeping pay relationships inside the organization sensible. A senior accountant should make more than a junior accountant; a manager should make more than the individual contributors they manage; two senior accountants on different teams should make comparable pay.
Internal equity issues commonly show up as:
- Compression — new hires earning similar to (or more than) tenured peers
- Inversion — managers earning less than their direct reports
- Function imbalance — engineering paid 30% above finance for similar levels of scope
- Tenure cliffs — people with 10+ years tenure paid the same as 3-year tenure peers
Internal-equity issues are usually fixed via mid-cycle adjustments after they're identified. Surveys help by anchoring external pay; internal equity is largely an HR/comp diagnostic exercise.