[cs-szazz]

I think the "overcompensating" can also happen when you hire, doesn't have to be an existing employee. Invariably other employees will find out what new hires make, and if you don't stick to loose compensation bands, you're going to have a tough time trying to justify this.

[glasss]

I think this happens more often than overcompensating employees who threaten to quit. Everyone I know has stories of a new person hired, making 10% - 20% more than existing people in the same position, and that person honestly not being worth while for the position in the first place. It produces a lot of hurt feelings / egos.