When Is Pay . . . Fair?

Do you think that your own pay level is a fair reflection of your experience and job performance?? Do you think that the person next to you considers their pay fair?? If you asked 100 of your fellow employees, how many would say yes?

Would you be surprised to discover that, at any given moment, most employees feel that they're deserving of more than what they're receiving??

So, if that’s a common employee perception, are most companies intentionally underpaying their employees?? Or are these employees filling their heads with deluded fantasies regarding their own self-worth and entitlement?

Perhaps we should first understand what exactly is fair pay?? Most would agree that it's being properly rewarded for experience and effort.? Not in relation to the employee next to you, but as a reflection of one’s own value to the organization. Because in many cases you may not want your compensation tied to what the next person is making.

You may be nodding your head at this point, but what confuses the issue every time is – what do they mean by “properly”?

Many Employees Consider Themselves Underpaid

·???????? They hear stories about what their friends and associates are paid – and the stories always speak of higher pay. The national headlines scream about “Livable wages”.

·???????? It seems that everyone who quit the company has left for more money.? Shocking. Who would have thought??

·???????? Employees learn of colleagues whom they consider as less valuable to the company being paid more than what they would consider “fair.” A bit subjective, I know, but often your subjective perception is your reality.

·???????? They're exposed to a steady drumbeat of outside influences (recruiters, the media, those same friends and associates, etc.) suggesting that they could do better elsewhere.

·???????? An employee’s natural skepticism allows that the company is offering only what it must. Like the lowest amount that would keep you from quitting.

Even where the pay levels are high in relation to the competitive environment, employees may remain convinced that their pay is average at best.? Unless the company makes a serious effort to communicate the market value of their pay program(s), left to their own devices the ?employees may not appreciate what they have.

So, what’s an HR Manager to say when confronted by this most common employee gripe?

You should focus on how the individual is being treated, because if you get caught up defending anyone else’s pay you’ll have lost the argument from your opening breath.? Your questioner has only one employee in mind, and they won’t be interested in listening to generalities of how the company has everyone’s interest at heart, how they strive to provide opportunities for competitive pay, blah, blah, blah.

Look at the employee's pay, their background and experience that preceded their current job, their history of performance ratings and where they stand in their salary range - low, mid, or high.? Does their pay level make sense?? Or is something out of whack??

Another factor to consider; most pay-for-performance systems have a critical flaw, in that company reward practices don't keep pace with the increased external value of employees – thus creating a long-term risk of disenchantment and disengagement.

• Salary ranges are (usually) increased in relation to the movement of the marketplace, but individual pay is increased for different reasons, and may not keep up with the competitive market.? Thus, employee growth within the salary range can be painfully slow.
• Company policies often limit merit and promotional increases for budgetary purposes, restricting the pay growth of even high performing employees.

In addition, companies don't react directly to changes in the cost of living, either by midpoint or salary movement, but employees do react to the COL as a personal barometer of whether their pay is fair.? So, pay expectations can be on a different track.

Also, as companies continue to “carry” some employees (continuous reward for mediocre performance) they may leave scant resources available for the reward of high performers.? But it’s these valuable employees who are at risk of leaving, while the mediocre ones will remain.?

When a reward system is flawed the average level of employee performance tends to gradually decrease as good workers leave and other high performers realize they won’t be "properly" rewarded for their efforts.? Over time a broad performance leveling effect takes place, to the detriment of your business.

Testing Whether Pay Is Fair

·???????? If the salary range is known, how does current pay compare to the midpoint? ?In summary and by individual. Significant job experience and consistent good performance ratings would suggest an above midpoint pay level. Or find out why not.

·???????? Ask your manager a simple question; what is the competitive rate for my job? Then drop the other shoe, where am I in relation to that rate?

·???????? A caution for those employees conducting "personal market research" : Internet sites (salary.com et al) offer an inexpensive and often simplistic view of the "market" --? and are likely viewed by management as unreliable and self-serving.

·???????? If you need someone to tell you that you’re underpaid, then you’re not.

·???????? For most employees it’s an act of faith that the company is playing fair – and if they come to believe otherwise it'll be difficult to regain their trust.

Do YOU consider yourself to be fairly paid?? What about your employees?? Be honest now.? There’s a line of thought that suggests there's little to gain in saying yes.? Then the company will do nothing.? But if you said h*** no! then perhaps the company will do something.? Cynical?? Skeptical?? Yes, on both counts, but that's exactly what your employees are thinking.