As VP Eng supporting a team of 30 at a startup. I had a similar situation. One employee was absolutely crushing it by performing above level and when compared to peers, despite earning about 5% less than the median (zero prior experience before being hired, so it was a bit of a gamble for the company). At annual comp adjustment time, I gave him a bump that brought him a percent or two above peers (including their own adjustment).
Well, did that unleash a shitstorm. One of his teammates complained that it wasn't fair that he made more money. She was solid and consistent and was squarely in the "meeting expectations" bracket. It was irrelevant to her that he was overperforming. She had been at the company 2 months longer and therefore, should make more money.
However, what really blew my mind was when the employee who got the raise complained about this as well. He also felt that it was unfair that he made more money than his teammate. They both then brought up that they felt that they felt it was an issue of sexual discrimination, which was especially ironic since our CEO, COO, and VP Finance were women (yes, I was on the management team of a tech company where women outnumbered men).
In any case, the agreed upon solution to make the problem go away was to a) bump the teammate's pay to match and b) completely eliminate any discretion or performance components to annual pay increases. Everyone simply got 3%.
