Employees think they’re underpaid — how to fix it before they quit

Compensation may be a taboo topic, but avoiding it is putting your business at risk.

The majority of employees don’t know if they are being paid fairly and more than half of employees plan to quit their job within the next six months if they perceive they are being underpaid, according to Payscale’s Fair Pay Impact Report.

Of employees who were paid above market rate for work, 42% actually believe that they are underpaid. Of those who are paid at market rate, 57% believe that they are underpaid, and 72% of employees who are actually underpaid believe that they are, Payscale’s data found.

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With competition for new talent reaching a frenzy in 2021, employers need to be transparent about their pay and may also need to increase base salaries in order to retain their current employees and attract new hires. Seventy-two percent of employers plan to increase base pay in order to retain workers, Payscale found.

“Many organizations underestimate the complexity of getting paid right,” Scott Torrey, CEO of Payscale, said in a release. “A strategic, consistent approach is required before you can even adopt any level of pay transparency.”

Employees who felt their employer was not transparent about their compensation structure were 183% more likely to look for a new position, compared to those who thought their organization had a clear strategy, Payscale found. One way to provide greater transparency is by reaching out to employees directly through surveys and other engagement tactics, yet 38% of employers do not ask workers about their satisfaction around pay.

Read more: Think you deserve a raise? Now is the time to ask for one

Providing transparency around pay should be a continuous conversation over the course of an employee's tenure, Payscale recommends. Organizations should also tap into market research to contextualize why certain roles are paid how they are, and then provide actionable steps for employees for how and when they can expect a pay raise.

“The policies and processes that you have in place should showcase that this is what we stand for, and this is what we believe in as an organization,” says Claire Barnes, chief human capital officer at Monster. “But the reality is, it's not easy to get there overnight.”

Employers also need to consider what’s included in a compensation package beyond just salary. Benefits, paid time off and flexible work schedules are all tools employees can use to sweeten the deal to keep employees with the organization and attract new hires.

“COVID-19 changed the game,” Shelly Holt, Chief People Officer of Payscale, said in the release. “Employees have choices and are expecting more from their companies on multiple levels. Certain perks that were differentiators before the pandemic are less enticing now and employer-paid healthcare, sick pay, vacation time, and workplace flexibility are now expected benefits. Simply put, workers want more than just higher wages."