As someone who's been on both sides of the fence, this is untrue. You pay people more or less what is sufficient to keep them happy (within reason). When you'

As someone who's been on both sides of the fence, this is untrue. You pay people more or less what is sufficient to keep them happy (within reason). When you're hiring a new employee, you tend to pay them their current salary + some percentage raise. So the biggest determining factor of your salary will be how much you made at your last job. This does mean that you end up with employees who are clearly superior getting paid less than some of their inferior peers. Certainly when I was a mere employee the idea that I was working harder and better than someone who got paid twice my salary was galling. But there are plenty of employees who aren't as concerned about what their peers are getting paid. Most of the time, assuming your salaries are relatively generous, I've learned that employees feel they are personally being rewarded sufficiently, and that's what matters to them. For those who make it more of an issue, you try to accommodate them if they're worth it. That said, it is really important to reward superstars to keep them really happy. Often, this means salary / bonuses, but sometimes it means type of work and the role they get to play on the project.