You may not have to compensate workers well to keep them happy

Employees who were paid less than the market rate for their positions were more satisfied when their companies did one thing, according to a recent survey.
OCT 19, 2015
By  Bloomberg
All workers think they should be getting paid more — that's nothing new. But two recent reports suggest employers may not have to compensate their workers well to keep them happy. A survey of 71,000 employees in the U.S. by PayScale, a website that tracks salaries, showed that employees who were underpaid — that is, paid less than the market rate for their position — were more satisfied with their work when their company was transparent about compensation. The percentage of underpaid employees who were satisfied with their compensation jumped to 82% from 40% when a manager simply sat down and discussed their pay. On the other hand, 64% of employees who were paid fairly (at market rate) believed they were underpaid, and would consider looking for higher-paying work elsewhere. The research shows that dissatisfied employees left even if their pay went up. "There is a huge disparity of information," said Tim Low, vice president of marketing at PayScale. "It used to be that employers had all the information when it came to compensation, and employees had the least." With salary data more readily available online, it's easier for employees to learn what their colleagues might be making, he said. That should motivate companies to clarify what they're paying and why, especially since the report shows most employees' expectations are off. Even though it's easier than ever to look up pay rates, most workers don't understand how their paycheck compares to the market rate. The most confused employees were the ones paid above market rate. About half of this group felt they were being paid at the market rate, and a third of them said they were underpaid. Only 21% of the people in this group knew that they were taking home a higher-than-market paycheck. The only people that overwhelmingly got it right were the underpaid workers. Of that group, 83% knew they weren't paid at market rate. "Fixing the perception gap in pay doesn't cost any money for companies," said Mr. Low. "But it requires companies to teach managers how not to run away from the conversation." It's relevant news for companies, which worry about how to keep their best employees. In a separate PayScale survey of 5,530 companies about how they were compensating workers, 63% of employers called retention their top concern. Still, less than half of the companies PayScale surveyed train managers on how to have tough conversations with employees about compensation. One way to make those conversations go smoothly, said Mr. Low, is to provide benchmarks for the different positions offered at the company, with salary ranges to show employees where they fall in the spectrum. Giving real-time salary data is also useful; however, companies would have to invest in systems that track the market rate for salaries. The survey also showed most companies weren't openly talking about pay. As of this year, less than half of employers said they had or are working on improving transparency with new salary tracking software or manager training. Companies concerned about holding on to their most valuable employees are incorporating more feedback into their management styles. The annual performance review is being ditched, in many places, for more frequent discussions about compensation and ways to change your pay like acquiring more skills, said Mr. Low. "There's not this magical one-year cycle," he said. If companies wait up to a year to discuss giving their star players a raise, they may find those stars are already on their way out.

Latest News

The power of cultivating personal connections
The power of cultivating personal connections

Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.

A variety of succession options
A variety of succession options

Whichever path you go down, act now while you're still in control.

'I’ll never recommend bitcoin,' advisor insists
'I’ll never recommend bitcoin,' advisor insists

Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.

LPL raises target for advisors’ bonuses for first time in a decade
LPL raises target for advisors’ bonuses for first time in a decade

“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.

What do older Americans have to say about long-term care?
What do older Americans have to say about long-term care?

Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.

SPONSORED The future of prospecting: Say goodbye to cold calls and hello to smart connections

Streamline your outreach with Aidentified's AI-driven solutions

SPONSORED A bumpy start to autumn but more positives ahead

This season’s market volatility: Positioning for rate relief, income growth and the AI rebound