Increasing salaries of older employees to match those given to newer employees

The issue lies not with HR, but with corporate managements who have, as their primary agenda (and correctly so) reduction in the overall payroll payout. Typically the new employee to currently employee ratio in any given year, will be anything between 5 to 20% depending on the growth and the current size of its workforce.

Let's say that we provide a 20% increase over current salaries to the incumbent 10% employees. That is a total increase in payout of 2% over the previous year. Now, to provide some measure of equity to the current employees, their salaries are also increased by 20%, so that nobody is unhappy, the total increase in payout is 90% x 20% = 18%. Considering that 60-80% of an IT organization's costs are payroll, we are talking of a nearly 60-80% x 20% = 12-16% increase in total costs over the previous year.

Try convincing the top management to release 15-20% more budget this year, of which only 2% is new employee acquisition expenses.

I think if we think from the HR point of view, they have no option but to let people go, than to increase everybody's salaries by 20%.