The complaint is almost always correct. The question is whether it's systemic or local, and what to do.

Diagnose:

Pull the comp distribution by tenure for the role. Box-plot new-hire pay vs. 1-year, 2-year, 3-year tenured. If the new-hire box sits above the tenured box, you have compression (and potentially inversion).
Compare to market data. If the external market rate rose 15% in 18 months (very common for software 2021–2022) and internal merit cycles raised tenured pay 4%, compression is mechanical — not a screw-up, but an un-addressed market shift.
Segment by hire date, band, and function. Compression often hits specific levels and roles most — mid-level engineers during a hiring boom, for example.
Check attrition among compressed cohorts. If the tenured engineers are also leaving at higher rates, compression is already costing money, not just morale.

What you recommend:

Market-adjustment pass for compressed populations (bring tenured pay to market, typically targeting the same percentile as new hires).
Tighten hiring-offer guardrails so offer bands don't outrun internal ranges without CHRO approval.
Communicate transparently. Manager talking points for the tenured-cohort conversation — 'here's what we're doing about it.' Silence after the leak is worse than the original compression.

Red flag: treating this as a line-manager grievance. Compression is a finance and retention problem with a specific fix.

New hires are paid more than tenured peers. Diagnose.

Stuck? Peek at a hint