Here at Pequity, we are constantly working on tools to help make better pay decisions. Managers & HR professionals often consult us for how to handle the stickiest of pay conversations, and we’ve noticed some of the most difficult chats begin with the employee’s saying something like this:
“I was talking to my buddy at Google and found out he’s making 50% more than me…”
“My mom sent me this article from Glassdoor, and it says my pay is below market…”
“After talking to some people on the team, I found out I’m paid less than the new hire…”
To start, let’s recognize that all the feelings these comments illicit are real and important. Of course you can be upset if you’re underpaid — and yes, it stings to find out someone doing the same work as you somewhere else is paid more. However, these conversation starters highlight misconceptions about compensation programs that directly undermines even the best employee’s ability to negotiate. And so below we cover some compensation misconceptions.
First, it should be stated that as long as a company is paying at or above the minimum wage, there are no laws that say a company has to pay a certain amount. The only laws that do exist, simply say companies must pay similar roles at similar rates. So this means…
- If a role’s average market pay is $125,000, Company X can still decide to pay $100,000. That’s allowed and legal.
- If Company X decides to pay all their employees $100,000, that’s allowed and legal.
- If Company X decides to pay all employees $100,000, except software engineers get $150,000, that is also allowed and legal.
This is why approaching compensation conversations with the print out from Paysa / Glassdoor / LinkedIn Salary in hand doesn’t often pay off (see what we did there?). What Company X, Y or Z chooses does, is not what your company has to follow. Not to mention, most of those public sources are self-reported data reducing their viability.
Next is the perception that being on the same team, doing the same work, at the same level, means all your pay should be exactly the same — if only! This one is a bit tricker with our previous mention of a law about similar pay for similar work. What’s not included in that, is that performance can be a discriminating factor. If you have a coworker consistently exceeding their role expectations, it is possible for the company to legally pay them more.
This is why approaching compensation conversations with the print out from Paysa / Glassdoor / LinkedIn Salary in hand doesn’t often pay off (see what we did there?). What Company X, Y or Z chooses does, is not what your company has to follow. Not to mention, most of those public sources are self-reported data reducing their viability.
Next is the perception that being on the same team, doing the same work, at the same level, means all your pay should be exactly the same — if only! This one is a bit tricker with our previous mention of a law about similar pay for similar work. What’s not included in that, is that performance can be a discriminating factor. If you have a coworker consistently exceeding their role expectations, it is possible for the company to legally pay them more.
This may leave you wondering, “well what about the new hire example?” In an ideal world, yes, new hires would start at or below the other team mates who are at the same level in the same role. Managers and HR professionals create compensation programs with the expectation that new hires 1) will need a bump from their current market rate (which is hopefully similar to the other employees already in that role), to be incentivized to leave their old role, and 2) they are unlikely to get a raise or promotion for at least 1-2 years in their role. Meanwhile, the rest of the team who has been there longer are likely to be eligible for an increase sooner, and are usually already on a path towards promotion.
All the above are examples of how lack of information can lead to frustration for both employees and employers. At Pequity we believe with the correct tools and information in place, company leaders and compensation decision makers can feel confident in their decisions and abilities to face these conversations.
Interested in learning more about making informed, purposeful pay decisions? We’d love to hear from you. Click here to send us an email – we read every letter that comes our way, and love to geek out on compensation.
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