Relative pay differentials refer to the difference in compensation between employees in different positions or levels within an organization. This can include both salary and non-salary compensation such as bonuses, stock options, and other perks. For example, a company may pay its CEO significantly more than its entry-level employees, creating a large pay differential. Similarly, a company may pay its salespeople a higher base salary and commission structure than its customer service representatives, reflecting the relative value of these roles to the organization. Relative pay differentials are an important consideration in maintaining employee morale and engagement, as employees may feel undervalued or demotivated if they perceive their compensation to be unfairly low compared to their peers.