WorldatWork – Market Pricing (C17) practice Test

Utilizing a "lag" pay strategy means that a company pays employees less than the market rate for their positions. One potential consequence of this approach is the difficulty in attracting qualified employees. When pay is not competitive, high-quality candidates may seek opportunities elsewhere where they can receive better compensation. This can lead to talent shortages and hinder the company's ability to fill key positions, ultimately impacting its overall performance and innovation.

While a lag pay strategy might potentially allow for cost savings that could be redirected toward benefits, that does not offset the primary issue of attracting the right talent. Candidates often prioritize competitive compensation highly when evaluating job opportunities. Therefore, a lagging salary structure can create challenges in recruitment that companies need to carefully consider.