In a tight labor market, employers are constantly looking for new ways to attract and retain top talent. Many companies offer generous benefits packages, flexible work hours, and other incentives. But data consistently show that financial compensation in the form of salaries and bonuses still represents the biggest draw for many employees.
This means that employees who feel they are being underpaid are likely to look for work elsewhere even if they have stellar benefits outside of their salary and bonus structure. That’s a risk that few employers can afford, especially when it has the potential to impact top performers or those in hard-to-replace positions.
That feeling of being underpaid can be subjective, but employees now have greater access to pay information than in the past. What remains most important is equity—both internal and external. Employees want to know that what they are being paid stacks up fairly with others doing similar work.
Employees Question Pay Equity
While websites such as Glassdoor can provide a lot of insight into employees’ pay relative to peers in their industry or even within the same organization, perception still has a lot to do with whether employees feel they are being fairly compensated. And recent data suggest many employees feel they aren’t being paid fairly.
According to compensation software firm Beqom’s 2018 Compensation and Culture Report, 31% of U.S. employees feel they are not being paid fairly based on age or race, while 48% believe women are underpaid relative to men. It’s important to emphasize that these survey results are reporting what an employee “feels” or “believes,” not necessarily what the reality is.
It could be entirely possible for a female minority employee to believe she is being underpaid relative to a white male coworker even if she is actually making the same amount of money or even more money.
The Role of Communication
Whether they reflect reality, employee perceptions of unfair pay can have a very detrimental effect on employee morale and may even lead to employees leaving for organizations they feel will compensate them more fairly. Education and communication can help.
In a follow-up post, we discuss some ways to help show employees that their salaries are a just reflection of their work.