HR Sounding Board: What Should You Do About Wage Compression?

Q: With British Columbia’s minimum wage increasing in June, how should companies address wage compression for employees earning just above the new rate?

A: When British Columbia’s minimum wage rises on June 1, 2025, many employers may face wage compression where employees earning just above the new minimum feel their pay advantage shrinking. If not addressed, this can impact morale, retention, and perceptions of fairness.

Here’s how HR teams can respond:

• Review pay bands – Take a fresh look at your internal compensation structure. Are employees in near-minimum wage roles still being fairly compensated for their skills, experience or responsibilities? Adjusting pay bands can help maintain internal equity and avoid compression-related dissatisfaction.

  
  

• Prioritize critical roles – If raising wages across the board isn’t feasible, focus your efforts where they’ll have the greatest impact. Identify key roles where responsibilities exceed entry-level expectations or where retention risk is highest and consider targeted adjustments.

  
  

• Communicate transparently – Don’t leave employees guessing. Share that you’re reviewing the impact of the minimum wage increase and be open about the process and rationale behind any changes. Even if wage adjustments aren’t immediate, transparency builds trust.

  
  

• Explore non-monetary rewards – When budgets are tight, look for other ways to recognize and retain employees. Perks like flexible scheduling, training opportunities, wellness initiatives or public recognition can go a long way in reinforcing value and appreciation.

Ignoring wage compression can demotivate higher-performing or longer-tenured staff, especially when they see new hires coming in at nearly the same rate. Even small adjustments or thoughtful communication can help preserve morale and trust during this shift.

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