Your Employees Believe They’re Underpaid… Here’s How To Handle It

Compensation can be a tricky field to navigate. As an employer, you perform market research to determine competitive salary offers, award regular cost of living raises, pay for overtime as required, and offer incentive packages. Even so, it’s highly likely many of your employees believe they’re underpaid.

If an employee approaches you with the belief that they’re underpaid for the work they do, don’t simply dismiss them believing it’s untrue – even if their salary is based on market research and you know they aren’t underpaid. Compensation is tied directly to perceptions and feelings, so you need to navigate the conversation carefully.

First, don’t get defensive or dismissive. You don’t yet know where your employee’s compensation concern has stemmed from, so you don’t know if it’s a reasonable, valid concern or not. Often, concerns about pay come from discovering what a coworker earns, or what a competitor pays.

Employees are, by law, allowed to discuss pay and compensation. If someone approaches you about a pay raise after finding out a coworker in a similar position earns more, it will be beneficial to conduct additional research to ensure everyone is being fairly compensated.

If an employee approaches you about a pay raise citing a competitor offering more for a similar role, it’s important you take their concerns seriously or risk losing that employee. A key factor to remaining competitive in today’s tough labor market is maintaining competitive compensation.

Second, determine what they really do every day. Sometimes, the job someone does and the job you think they do are two different things. As their employer, it’s your job to maintain awareness of the work your employees are actually doing on a daily basis. You may be unaware someone has taken on extra responsibility to ensure the work gets done because a coworker never gets anything done on time, or that person has implemented processes to expedite routine tasks, or has taken on a leadership role within a team.

Have a conversation with your employee about the tasks they do on a day-to-day basis, not just about the tasks in their job description. If they are taking on more responsibility than you realized, or are contributing in unexpected ways, it may be prudent to consider a pay raise.

Third, discover what your employee considers fair compensation for their work. If someone approaches you to discuss what they believe is unfair pay, they likely have an idea as to why they think that and what fair pay might look like. The conversation looks entirely different if they believe they’ve earned a raise “because I do good work every day,” versus citing a competitor paying substantially more than what you pay for a similar position.

It’s entirely possible your employee has a wildly unrealistic idea about what fair pay looks like. Whether they’re new to the workforce and believe everyone regularly gets a 10% raise, or are under the mistaken impression that their specific role earns higher compensation than is realistic, it’s important you provide information and reasoning as to why their current role is compensated appropriately. Allowing a misunderstanding about compensation related to job duties to continue will only lead to additional controversy and dissatisfaction down the road. A good way to approach conversations such as these is to not only offer market pay data relating to their current role, but to also discuss different possible paths to taking on more responsibility and earning promotions which could justifiably lead to pay raises.

Navigating compensation as an employer is no easy task, especially when employee perceptions and feelings play such a large role. Remaining competitive in today’s tough recruiting environment involves more than just offering annual cost-of-living raises and incentive programs. You must remain vigilant in monitoring market trends, and updating your compensation packages fairly and appropriately. If an employee approaches you with compensation concerns, don’t dismiss them; take them seriously and determine what is truly fair for the job they really do for your business.