Most Organizations Have No Idea Whether They’re Paid Fairly

Managers know?that engaged employees are more effective. But?despite the vast amount of?employee engagement research?out there, very little of it focuses on?a person’s primary reason for employment in the first place: getting paid.

PayScale, the compensation software company where I work, surveyed 71,000 employees to study the relationship between pay and employee engagement. The study results revealed that one of the top predictors of employee sentiment, including “satisfaction” and “intent to leave,” was a company’s ability to communicate clearly about compensation. In fact, open and honest discussion around pay was found to be more important than typical measures of employee engagement, such as career advancement opportunities, employer appreciation and future enthusiasm for the company.

Pay is a crucial component of engagement because it’s not just a number; it’s an emotional measure reflecting how valued an employee feels by their employer. And it turns out, how people feel about their deal plays a huge role in how engaged they are in their work. While there’s still a lot to learn about the connection between the perception and reality of compensation, and how both?relate to engagement, we identified a few interesting data points that may change how you talk to your employees about pay.

First, people are often wrong about how much they’re paid compared to the going market rate. Perceptions about pay don’t always reflect reality, even if employers are paying the same — or more — than similar companies. In fact, a whopping two-thirds of people who are being paid the market rate believe they’re actually?underpaid, representing a huge discrepancy.