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Compensation Highlights: Most Employees Believe They Are Paid Below Market Rate (and This Affects Their Work and Loyalty)

Perception is reality – and the reality is that most workers believe they are being paid below market rate regardless of where they actually stand compared to their peers. Another significant reality is that this perception negatively impacts not only how engaged these workers are in the workplace, but also their intentions of staying with their current employer. That’s the bad news. The good news is this: you can take steps to change employee perceptions and, in the process, help create a workplace culture of satisfaction and loyalty.

A Significant Market Rate Pay Survey

The findings noted above are from a recent PayScale survey of 71,000 workers as reported in a Harvard Business Review article. The survey broke its results into three groups of respondents: those who were being paid above market, at market, and below market. For those being paid at or above market rate, the vast majority believed they were being paid less relative to the market than they actually were. Case in point: some 80% of workers who were really being paid above market believed they were either being paid below market (35%) or at market (45%). In other words, only about 1 in 5 employees at this level truly understood that they were being paid above market.

Likewise, of those respondents who were truly being paid at market rate, nearly two-thirds (64%) believed they were being paid below market. The only respondents who seemed to accurately understand their compensation relative to their actual market rate position were those workers being paid below market; 83% perceived (correctly) that they were being paid below market.

How Worker Perception Affects the Employer

According to the HBR article, worker perception affects their engagement, satisfaction and, ultimately, loyalty. Not surprisingly, pay is a huge factor in employee motivation, engagement and performance. The perception that pay is too low makes the employee feel undervalued and underappreciated. This, of course, leads to job dissatisfaction and to seeking opportunities elsewhere. And of course, when an employee leaves an organization, the company incurs significant costs to hire, train and assimilate a new employee. It now appears much of this turnover is unnecessary and avoidable.

The Solution is Communication

By openly and honestly sharing market rate information with employees, your company can align perception with reality. You can assure employees they are probably better off compared to the marketplace than they thought. And even if you are paying below market, you can explain why that pay position is necessary (e.g., corporate financial setbacks, other elements of compensation that offset lower pay, etc.).

Of course, if you have not done a recent Market Rate Analysis, you won’t be in a very good position to communicate positively with employees. Even if you have done a market analysis in the last two years, do you know how best to share the findings with employees so they will have a better appreciation of their position in the workplace? If not, or if you are overdue for a Market Rate Analysis, Total Reward Solutions can help. Contact us today at 317.589.8529.

Cassandra Faurote

About Total Reward Solutions:

Need an additional total rewards or compensation service from us? Total Reward Solutions is dedicated to innovating total rewards that drive people and business excellence. As you recall, Total Reward Solutions offers a broad range of compensation, benefits, performance management, and reward/recognition consulting services to help your organization attract top talent, motivate employees and retain top performers. Call us today at 317.589.8529 to discuss how we can help your organization develop and implement additional compensation and total reward programs.