Briefly explain pay secrecy, pay compression, and pay inversion in the context of wage and salary administration.

Answers will vary. Once wages and salaries have been determined, the resulting compensation system must be administered on an ongoing basis. Most organizations call this process wage and salary administration or compensation administration. Certain issues related to compensation must also be addressed as part of this administration process. Two of the most important factors involve pay secrecy and pay compression. Pay secrecy refers to the extent to which the compensation of any individual in an organization is secret or the extent to which it is formally made available to other individuals. Advocates of pay secrecy maintain that what an individual is paid is his or her own business and not for public knowledge. They also argue that if pay levels are made known to everybody else, then jealousy or resentment may result. Some organizations, however, adopt a more open pay system in which everyone knows what everyone else makes. The logic is that this promotes equity and motivation. Another problem that some organizations must confront occasionally during wage and salary administration is pay compression. Pay compression occurs when individuals with substantially different levels of experience or performance abilities are being paid wages or salaries that are relatively equal. Pay compression is most likely to develop when the market rate for starting salaries increases at a rate faster than an organization can raise pay for individuals who are already on the payroll. As a result, an employee with experience may find himself or herself not making much more than an entry-level employee. In some cases, the external market can change so rapidly that new employees are actually paid more than experienced employees; this is known as pay inversion.