1. People who think they are equivalent to someone getting higher pay (and there will always be plenty, regardless of the actual truth) will get demoralized and lose motivation. This can happen at any level, not just junior employees.
2. In a market where great talent is scarce, you will lose your ability to negotiate if the candidate has a better offer from your competitor. Sometimes bidding up makes sense.
3.More generally,this works less well in any field where there is a high possible variance in ability of folks with same credentials and experience. This is especially true in tech (only matters if you are in the market for top talent, not the median. Burger king doesn't need to care, but Facebook and Google can't survive with median talent). Without the ability to have that variance in compensation, you lose the ability to get top 25% folks, especially when your competitors are not restricted in the same way.
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1. People who think they are equivalent to someone getting higher pay (and there will always be plenty, regardless of the actual truth) will get demoralized and lose motivation. This can happen at any level, not just junior employees.
2. In a market where great talent is scarce, you will lose your ability to negotiate if the candidate has a better offer from your competitor. Sometimes bidding up makes sense.
3.More generally,this works less well in any field where there is a high possible variance in ability of folks with same credentials and experience. This is especially true in tech (only matters if you are in the market for top talent, not the median. Burger king doesn't need to care, but Facebook and Google can't survive with median talent). Without the ability to have that variance in compensation, you lose the ability to get top 25% folks, especially when your competitors are not restricted in the same way.