My Employees are Underpaid. Now What?<\/h2>\n

My first job in my second career was to build compensation programs. I have fond memories of constructing a variety of systems for all different groups of employees using tools that were just a little more sophisticated than an abacus. The availability of financial resources was different then too. I can remember developing merit matrices where a high performer who was low in the salary range could get an annual salary increase north of 10%… as part of the normal merit program! There was also merit money to use throughout the year to handle special circumstances like promotions and counter-offers. Times are certainly different now given tight purse strings and slower market salary growth. Salary increases are much smaller and there are fewer dollars to use to correct situations where employees are underpaid.<\/p>\n

This has an implication that touches on an important issue \u2013 what do you do when an employee is paid less than they should be?<\/strong> Whether they changed jobs or they were a new hire into your organization, you were able<\/em> to set their pay low. If employee satisfaction, low turnover, and high levels of productivity matter to you, this is a situation you should avoid.<\/p>\n

To help you establish a salary for a new employee, consider the following two questions:<\/h3>\n

\n
1. What is the least I have to pay to get the person?<\/em> Don\u2019t stop here.<\/li>\n
2. What is the appropriate pay for the value the person will deliver?<\/em> Both questions matter.<\/li>\n<\/ol>\n

   To state the obvious, underpaying creates retention risk and can diminish engagement<\/strong>. With the availability of information, employees know when they are underpaid.<\/p>\n

   Maslow would say that pay needs to be right because of our inherent need for security. <\/em><\/p>\n

   Herzberg would remind us that pay just has to be fair. Being unfair produces a satisfaction issue. Being more than fair doesn\u2019t really provide a proportional ROI in terms of satisfaction. Factors other than pay can drive up levels of satisfaction but they won\u2019t have that effect if pay isn\u2019t right.<\/em><\/p>\n

   Sometimes organizations find that they are underpaying employees for reasons that are no fault of their own. Fast-developing employees can outpace normal salary growth. Sometimes the market value of positions shifts because of external factors.<\/p>\n

   Whatever the reason, you should have a strategy to help you deal with these gaps. One strategy is to simply correct the issue with one big salary increase.<\/p>\n

   If constrained resources necessitate a different strategy, you can do the following.<\/h3>\n

   \n
   • Establish a target salary, or a small salary range, that you think is appropriate for the employee<\/li>\n
   • Determine a multi-step plan to transition to the target salary<\/li>\n
   • Talk with the employee about how you view their current pay and your plan to address it. Let them know that you need them to continue performing to justify the planned actions. This is obviously a sensitive conversation that needs to be handled carefully. But it\u2019s better to talk about it than to pretend it doesn\u2019t exist. The employee will appreciate knowing that it is on your mind too.<\/li>\n<\/ul>\n

     The scenario of the underpaid employee is a great example in which doing nothing is the worst option. The only way the situation will correct itself is if the employee leaves. So build a plan and talk about it. And the next time you have the opportunity, avoid being put in the situation again<\/strong>.<\/p>\n

      <\/p>\n

     Image courtesy of FreeDigitalPhotos.net<\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

     There\u2019s nothing more frustrating than being in a situation where the resources needed to address an important issue are not available. This is often the situation that leaders encounter when they are dealing with an underpaid employee. This article peels back the issue and provides counsel on how to move forward. And, as you might suspect, it also provides a justification for avoiding the situation in the first place.<\/p>\n","protected":false},"author":4,"featured_media":677,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[6,7],"tags":[35,34,33],"_links":{"self":[{"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/posts\/675"}],"collection":[{"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/comments?post=675"}],"version-history":[{"count":4,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/posts\/675\/revisions"}],"predecessor-version":[{"id":679,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/posts\/675\/revisions\/679"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/media\/677"}],"wp:attachment":[{"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/media?parent=675"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/categories?post=675"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepeopleadvantage.com\/wp-json\/wp\/v2\/tags?post=675"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}