If Your Employee Says: “I’m Underpaid!” - Understand that it’s all relative

From our January Newsletter

How do you respond to an employee who says he or she is underpaid? Unfortunately, in this instance, using Google – which works so well for so many topics – will likely not help. Two top sites that came up on a recent search of the terms “Am I underpaid?” were (1) a link to a site entitled “Underpaid and Bullied”and (2) a blogger called the “Evil HR Lady.” Neither site answers the question to any satisfaction.

Conclusion: Pay is relative and an HR professional requires keen insight and solid comparative data in order to address such an employee statement.  And, clearly, Google cannot help in this situation.



The question is: Relative to what?

Perhaps, relative to Donald Trump, your employee is underpaid. Then again, relative to a teenager’s first job at a fast food restaurant in the mall, your employee may be overpaid. What you need to understand is: How is your employee compensated in relation to others doing a similar job and in relation to his or her overall contribution and performance at your organization?

There are many comparison points in salary, all of which have an impact on a person’s overall compensation. These include:

• Years of experience
• Year of graduation
• Expectations around perceived worth
• Salary bands within the organization
• Organizational objectives around attracting and retaining quality employees, i.e., paying at, above, or below your competitors
• Negotiation skills
• Luck and timing

There are so many comparison points and so few sources of hard facts that it may be challenging to settle on a suitable and satisfactory answer. And yet, HR professionals are expected to come up with a reasonable answer for every employee in their entire organization.

So here is what you should do:

1. Get data. Specific to your industry, if possible and, if not, at least within the larger general area, i.e., service. If you cannot acquire what you need, you may need to consider a unique survey that will collect relative information.
2. Interpret said data. Once you have comparative data in hand, it is important to interpret it within the larger picture, taking into account economic developments and trends. 
3. Understand the specific circumstances, the truth, and reasoning behind an employee’s demands and consider your organization’s ability to respond. 
4. Apply the data and recommendations to best suit a win-win or a best-compromise outcome. Easier said than done, but a compensation professional can help you determine a strategic application of data.

Let us help you get and interpret the comparative data you need so you can answer with confidence an employee who wonders if he or she is underpaid. Contact me if you have any questions.

Steven Osiel