When Employees Say They Are ‘Underpaid,’ Bosses Often Misunderstand

livemint.com:

Jennifer Deal is a senior research scientist at the Center for Effective Organizations at the University of Southern California. She is co-author of “What Millennials Want from Work." When leaders hear employees complain about being underpaid, they typically investigate to see if the complaint is reasonable. They might examine pay benchmarks, historical comparisons and what the company can afford to pay without affecting profitability.

This approach, however, doesn’t always reflect a good understanding of what the employee’s concerns really are or how best to address them. To effectively address compensation complaints, managers need to know what employees mean when they say they are unhappy with their pay. Here are four common frameworks employees have when they complain about their compensation: Their compensation doesn’t match offers being made to new hires.

Using benchmarks to compare and justify pay works nicely—but not always. That can be the case in an inflationary economy, or in jobs or locations where competition for talent is fierce and companies have to pay premiums to attract good people. In those cases, employees might be perfectly satisfied with their pay—until they find out that new hires who will be doing the same work are being offered better packages.

Leaders need to recognize that workers won’t accept claims that their pay reflects appropriate benchmarking when the benchmarking doesn’t reflect the current reality they see. Instead, leaders need to acknowledge the fast-changing nature of pay and assess whether their actual pay rates match offers being made today. The company is getting more from employees than it is paying for.