Organizations increasingly offer externally competitive pay levels to attract top talent. While effective for recruitment, such practices may have unintended consequences for newcomers’ organizational socialization. Drawing on the interactionist perspective, we developed a model to examine how relative pay levels influence reactions from both newcomers and veteran employees. Specifically, we theorized that higher relative pay levels for newcomers enhance socialization outcomes—including role clarity, task mastery, and social integration—through newcomer proactive behaviors, particularly when newcomers feel psychologically entitled to their elevated pay. Conversely, higher relative pay levels may hinder socialization outcomes by provoking veteran employees’ social undermining behaviors, with these adverse effects being especially pronounced when newcomers’ tasks are highly interdependent with those of veterans. Our hypotheses were supported by a multi-wave, multi-source field study of 133 newcomers paired with their coworkers. These findings advance the literature on newcomer socialization by highlighting how organizational compensation practices aimed at attracting talent can shape the post-entry socialization process.
