Picture this: You've been looking for a new job, and it's finally time to negotiate salary. Or else, it's time for your annual review and you're hoping for a big raise. How do you know how much to ask for? 

Despite the rise of online forums describing how much people make at competing companies--which in theory should make market rates pretty transparent--a new study says most of us are operating in the dark. 

PayScale Inc. surveyed 71,000 employees about their compensation packages. Not surprisingly, they found that the number-1 predictor of whether employees were happy with their positions had to do with whether they perceived that they were being paid fairly.

The big surprise? Their perception was most often wrong.

1.         People think their employers are ripping them off.

Roughly two out of three employees told PayScale they thought their employers were paying them less than they could make elsewhere. However, this held true even when their actual pay matched or exceeded the market rate for similarly situated colleagues across companies.

It's sort of like the old radio show about a town in which all of the children are above average.

2.         As a result, they're ready to leave.

This probably isn't a shock, but the more people thought they were being underpaid, the more eager they said they were to move on and find another position (and perhaps the less motivated they were to do great work while they were still with their current employer).

"The bottom line is this: if you don't communicate to your employees that they are being paid fairly compared to their talent market, they may leave," PayScale's Dave Smith wrote in Harvard Business Review.

3.         It's the boss's responsibility to fix.

I'm certainly not advocating this next part. But perhaps even more surprising in the PayScale study is the finding that employers could get away with actually paying people less than they were worth--but only if they were upfront with the employees about their lower compensation.

"If an employer pays lower than the market average for a position, but communicates clearly about the reasons for the smaller paycheck, 82% of employees we surveyed still felt satisfied with their work," Smith said.

4.         Women believe they're being underpaid--even when they aren't.

It's certainly true that on average, women have been paid less for the same work than their male colleagues. However, PayScale found that even when women were actually being paid more than their colleagues (both male and female), they were nevertheless more likely to perceive that they were being underpaid.

More precisely, according to Smith, "women who are paid above the market average for their job are 18% more likely to believe they are underpaid than men in the same pay bracket."

Given the history of gender bias in the workplace therefore, this means it's even more important for companies to be open about compensation--at least if they want to keep their best men and women on board.


Published on: Oct 9, 2015
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