Reasons Why Employees Are Underpaid

It's extremely common for working people to be underpaid. When you are underpaid, it means that another employer or even another manager in your current organization would pay you more for your services than you're getting paid now. They would pay you more if they knew about you and if you knew how your talents could solve your new manager's greatest pain points!

Many people don't know what their gifts and their experience are worth to employers. They take whatever salary they are offered. We can't blame them! It's not as though we have compensation coaches hanging out on every corner waiting to advise us on our earning power.

Even if there were compensation coaches standing on every street corner to advise us as we walk by, we'd also need Confidence Coaches to serve as backbone stiffeners when we're thinking about talking to the boss about our salary level!

Pay is not granular. Managers don't give out small salary increases all the time. They wait and give out one salary increase per year, if they give out salary increases at all. If you gradually expand your role over time, even to the point where you are managing huge projects with big financial impact on your employer, those additional responsibilities won't be factored into your pay level as they occur.

You can make the case for a significant pay increase when your performance review date comes around, but your manager may say that he or she is limited in the raises they can give out. If you think about it, this argument makes no sense.

If you took on Jane's duties after Jane moved to Alaska and the company didn't replace Jane, then presumably your double duty is saving your employer payroll dollars and increasing profits. You should get a piece of that, but when managers are given across-the-board salary increase policies to enforce that is unlikely to happen.

Most people find it hard to negotiate on their own behalf. We can negotiate with a car salesperson or somebody who rings our doorbell and offers to shovel our sidewalk, but we can't negotiate with our own boss without fumbling. That makes sense, because we know that if we anger the boss our fortunes in the company could sink.

We could even be let go for being a difficult employee. This dynamic silences people with great ideas in workplaces every day, and that hurts customers and shareholders. It hurts you, too. If you worked for yourself you would have more than one client. You wouldn't have just one boss who controls your entire income.

This is one reason why so many consultants who bounce between freelance and salaried work become more confident and laissez-faire about hanging on to any one job as they gain experience. They know that it's more important to stay marketable by growing their resume and to keep an eye on the talent market and their own value than it is to stay employed with any one organization over the long haul.

Salary increase policies that force managers to divvy up a small pay-increase pool among several hardworking and talented people are another reason you are probably underpaid. In the real-world talent market just outside your company's walls, there are no artificial imposed-from-above caps on earning power. People earn what they can negotiate for. Inside the company, that ebb and flow is squelched.

That is only possible because most people hate to change jobs. They will stay and be underpaid rather than subject themselves to a job search that they feel will be scary or unpleasant. Thus they dim their own flame and make themselves less marketable over time. The final reason you are probably underpaid is salary compression.

That's what you get when you hire a person into a job at the market rate, or close to it, but only give them tiny pay increases once a year. Those people soon fall behind the market. They may not even realize it. Salary compression is the reason people have to change jobs to get paid fairly.

That's why I don't want you to believe that your career is in great shape just because you've had your job for a while. Keeping a job past the point where it serves you is not good for your career -- it is just the opposite.

Think about what you want in your life and career and then ask yourself "Am I doing what I want to do, and am I getting paid what I deserve?" If the answer is no, that's a signal from Mother Nature. The world is big. Plenty of other employers and people could use your talents. Some of them will undoubtedly value you more than are valued right now.

Lots and lots of people don't know how to value themselves in the talent market, and even more people wouldn't feel comfortable bringing up the topic of their salary even if they knew they were underpaid.

It is in your employer's best interest, let's be honest, to keep you in the dark about how much you should be earning and also to keep you feeling hesitant to talk about your pay level. That's one reason performance appraisals happen once a year. The big message to employees is "We only talk about your compensation once per year, at your performance review."

We must ask, "Why do we teach employees to negotiate on the company's behalf with the vendors, but we don't teach them to negotiate with their employer on their own behalf?"

Here are several reasons so many working people are underpaid, whether they know it or not:

1. No transparency

2. Pay isn't granular

3. You don't want to bring it up

4. Annual review/salary increase policies

5. Salary compression

The first reason you're probably underpaid is obvious: You don't know how your pay compares to that of other employees in your organization, unless you're working for the government or another employer that reports its team members' salaries. Without that information, you can't calibrate your own pay against that of other people around you.

If you have a job title that doesn't match up to your actual responsibilities -- for example, if your role is much broader or more strategic than the typical Business Analyst or Database Administrator role, the one your company is using for salary-survey-comparison purposes -- you may be out of luck. You may have to change jobs to get paid what you're worth.