Compensation Disparity is actually familiar issue terms into corporate sectors now days.

This
terms is actually refers for when in any particular filed of work; employees are paid different for
similar work is actually compensation disparity.
Example, Mr. XYZ is a corporate sales officer of UNILEVER Bangladesh. Unilever is one the
fastest growing FMCG (Fast Moving Consumer Goods) in Bangladesh. He gets a very handsome
amount for living hood. On the other hand, Mr. ABC is sharing the same position in Aman group
of industries in Bangladesh. But due to compensation disparity, where both are holding the same
position but unfortunately, Mr. ABC is not paying enough as like Mr. XYZ

Now, this day’s employs are facing this issue. But behind the substance there are so many
individuals’ reasons that actually occurs like,

Discrimination: Discriminatory practices based on factors such as gender, race, ethnicity, age,
or other protected characteristics can lead to unfair discrepancies in compensation. This could
involve biases in hiring, promotion, or salary decisions.
1. Occupational Segregation
2. Lack of Transparency
3. Negotiation Skills
4. Implicit Bias
5. Historical Factors: Lack of Pay Equity Policies

But in the terms of MNC’s compensation disparity is actually happening on,

• Regional Wage Differences: An MNC may have employees performing similar roles
in different regions. For instance, a software engineer working in the company's
headquarters in the United States might receive a significantly higher salary compared to
a software engineer with similar qualifications and experience working in a subsidiary
office in India due to differences in cost of living and wage levels between the two
countries.
• Expatriate Compensation: Consider an American expatriate working for a
multinational tech company in Singapore. In addition to their base salary, the expatriate
might receive various allowances such as housing subsidies, education allowances for
their children, and cost-of-living adjustments to maintain their standard of living in a
high-cost location like Singapore. This can result in significant disparities in
compensation compared to local employees performing similar roles.
• Corporate Policies and Practices: An MNC may have a standardized compensation
structure across its subsidiaries, but variations in local regulations and cultural norms can
lead to disparities. For example, while the company may have a policy of providing
performance-based bonuses globally, differences in interpretation of performance metrics
or local preferences for non-monetary incentives may result in disparities in bonus
amounts among employees in different regions.
• Currency Fluctuations: Suppose a multinational retail corporation based in Europe
operates stores in various countries, including Brazil and Japan. Employees in Brazil
might be paid in Brazilian Real (BRL), while employees in Japan might be paid in
Japanese Yen (JPY). Fluctuations in exchange rates between BRL, JPY, and the Euro
(EUR) can impact the value of compensation packages, leading to disparities in
purchasing power and living standards for employees in different countries.
• Diversity and Inclusion Initiatives: Despite efforts to promote diversity and inclusion,
unconscious biases or discriminatory practices may still exist within MNCs, leading to
disparities in compensation among employees from different demographic groups. For
example, women or minorities may be underrepresented in senior leadership positions
and consequently receive lower compensation compared to their male or non-minority
counterparts, even if they have similar qualifications and experience.
& in local companies,
• Gender Pay Gap: In a local marketing agency, male employees predominantly occupy
senior management positions while female employees are more commonly found in
entry-level or mid-level roles. Despite having similar qualifications and experience,
female employees may receive lower salaries and bonuses compared to their male
counterparts. For instance, male marketing managers might earn 20% more on average
than female marketing managers within the same company.
• Seniority-Based Pay: In a local manufacturing plant, employees who have been with
the company for several years may receive higher compensation compared to newer
hires, regardless of their job performance or skill level. For instance, a production line
worker who has been with the company for 10 years might earn 30% more than a newly
hired worker performing the same tasks, leading to disparities in pay based on tenure
rather than merit.
• Skill-Based Pay: In a local software development firm, employees with specialized
skills such as proficiency in programming languages or experience with emerging
technologies may command higher salaries compared to their peers with generalist skills.
For example, a software engineer with expertise in machine learning might earn 50%
more than a colleague with similar experience but without specialized skills, resulting in
disparities in compensation based on skill level.
• Performance-Based Bonus: In a local sales company, employees are eligible for
performance-based bonuses based on their individual sales targets. However, disparities
in bonus amounts may arise if there are inconsistencies in performance evaluation criteria
or if certain employees have better access to high-value clients or territories. For instance,
a sales representative who consistently exceeds their targets might receive a bonus that is
double the amount received by a colleague with similar performance due to differences in
territory allocation or sales support.
• Non-Monetary Benefits In a local retail chain, full-time employees may receive more
comprehensive benefits such as healthcare coverage, retirement plans, and employee
discounts compared to part-time or temporary workers. For instance, full-time sales
associates might have access to employer-sponsored health insurance and retirement
savings plans, while part-time workers only receive basic hourly wages without
additional benefits, leading to disparities in overall compensation packages.

The impact of compensation disparities on employees can be significant and wide-

ranging, affecting various aspects of their professional and personal lives:
• Morale and Motivation: Employees who perceive unfairness in compensation may
experience lower morale and reduced motivation to perform at their best. When
individuals feel undervalued or underpaid compared to their peers, it can lead to feelings
of resentment, frustration, and disengagement from their work.

• Job Satisfaction: Compensation disparities can negatively impact overall job

satisfaction among employees. When individuals believe that their efforts are not
adequately recognized or rewarded, they may feel less satisfied with their jobs and more
likely to seek employment opportunities elsewhere.

• Retention and Turnover: Employees who feel unfairly compensated are more likely to
leave their jobs in search of better opportunities. High turnover rates resulting from
compensation disparities can disrupt team dynamics, increase recruitment and training
costs for employers, and erode institutional knowledge within organizations.

• Performance and Productivity: Compensation disparities can hinder employee

performance and productivity. When individuals perceive that their efforts will not be
fairly rewarded, they may be less motivated to exert discretionary effort or go above and
beyond their basic job responsibilities, leading to decreased performance levels and
diminished organizational effectiveness.

• Career Progression: Compensation differentials can create barriers to career

advancement for employees, particularly those from underrepresented or marginalized
groups. When certain individuals are systematically underpaid or overlooked for
promotions due to factors such as gender, race, or ethnicity, it can perpetuate inequities
and limit opportunities for professional growth and development.

• Workplace Relationships: Compensation disparities can strain relationships among

coworkers and erode trust in management. Employees may harbor feelings of resentment
or envy towards colleagues who receive higher pay for similar work, leading to
interpersonal conflicts and a breakdown in teamwork and collaboration.

• Health and Well-being: Financial stress resulting from inadequate compensation can
negatively impact employees' mental and physical health. Employees who struggle to
make ends meet or feel financially insecure due to compensation differentials may
experience higher levels of stress, anxiety, and burnout, which can in turn affect their
overall well-being and productivity.

In conclusion, compensation disparities have far-reaching implications for both

employees and organizations. These disparities can significantly impact employee
morale, job satisfaction, retention rates, performance levels, and overall well-being.
Employees who perceive unfairness in compensation may experience lower motivation,
increased turnover, and strained workplace relationships. Moreover, compensation
differentials can hinder career progression and perpetuate inequities within organizations.
Addressing compensation disparities requires a multifaceted approach that includes fair
and transparent compensation practices, proactive efforts to mitigate biases, and a
commitment to promoting diversity and inclusion. By ensuring that employees are fairly
compensated for their contributions and provided with equal opportunities for
advancement, organizations can foster a positive work environment, enhance employee
engagement, and ultimately drive sustainable success. In striving towards pay equity and
fairness, organizations not only benefit their employees but also strengthen their
competitive position and contribute to a more equitable society as a whole.