What do we feel about our salaries?
All of us work to ‘get paid’. Our salaries are not mere numbers. They are actually a measure of how well we are valued in the company for the work that we do. Salaries, in turn, give us a market standing and a social status.
Every organization believes that salaries, among other factors such as systems, processes, proper career planning, culture among other things help to build engagement of employees. An engaged employee is expected to be more effective and productive. The emotional sentiment towards a job, whether it is “very much satisfactory and fulfilling to stay” or “better to leave” is always due to this one important factor — “salary”.
And then there are competitors to consider! There will always be companies out there, ready to offer you more for the same role right? And then there will be perks to consider! An offer of “more freedom”, “less pressure”, “great future” are all there on the table. You have done it before and somebody else will also do it. In the bargain, without acquiring additional skills, our perception about our value (salary) becomes larger than the position that we occupy. This situation has become alarming!
It is at this juncture, that we need to consider our perception towards the salary that we earn. The general feeling among all employees is that we are not paid as well we should be, atleast not as per the market value. We ‘think’ that the competitor pays more for our role. In many cases, we feel that competitors actually pay more for work less than what we do. Poor perception of salaries is a factor for attrition in addition to other factors like role elevation opportunities, better growth prospects etc. Average increments as per the Deloitte India Talent Outlook 2023 is expected to drop 0.3% in 2023 to 9.1%. Attritions was around 19.7% in 2022 and companies are budgeting higher than previous years on increments.
There is a very interesting article in medium by Ted Bauer that cites some interesting data from research published in Harvard Business Review. The most important finding of survey done across 71,000 employees to understand the relationship between salary and employee engagement suggests that majority of employees (80%) who are actually paid well above the market perceive that they are either underpaid (35%) or paid at market value (45%) as compared to their market value. 64% of employees who are actually paid at market value perceive they are underpaid. Obviously, those who feel they are underpaid would have updated the CV by now (and many times over) and ready to go!
An open and frank discussion with the employee around salary, was found to be more important than other earlier cited measures of employee engagement, such as career advancement opportunities, employer appreciation and future enthusiasm for the company. Such discussion prove to be extremely useful in preventing attrition. Many employers wouldn’t do it because they wouldn't want to accept that they are paying less than the market value. It is also true that overpaying employees in order to retain them without having such discussions doesn’t make him more satisfied.
There is a need to change the mindset today if at all we want to have frank and open discussions around salaries, suggests Dave Smith in his article “Most People Have No Idea Whether They’re Paid Fairly” published in HBR Magazine — December issue. Employers need to keep their leadership teams and managers informed about accurate market data regarding salaries and compensation benefits. This will help everyone to base their discussion on facts and not “just perceptions”. If the discussions help employees to understand how their salaries were determined and how much their individual performance and span of responsibility decides their salary, they will prove to be very succesful. Additionally, information on what needs to be done to get to the next salary level can also be discussed.
Organizations today assume that their employees perceive their salary as they should “actually” do, which is incorrect. In order to build employee engagement, it is important to know how their employees feel about compensation matters just as much as what they’re actually being paid. And the best way to do is get your facts about compensation right, have frank and transparent communication with your employees on the process of salary fixations and increments and then do everything else to engage them.
