In a recent article, Harvard Business Review examines the nature of the paycheck. For example, PayScale, a compensation software company where the author of that article works, surveyed 71,000 employees to study the relationship between their pay and their level of engagement. Results showed that one of the top predictors of employee sentiment, such as “satisfaction” and “intent to leave,” was the company’s ability to clearly communicate about pay and compensation. For many, an open and candid discussion about pay was found to be more important than advancement opportunities, employer appreciation, and enthusiasm for the company.
In addition, a recent study, the Staples Advantage Workplace Index, reported that around one-third of millennials reported that higher salary is the biggest contributor to their loyalty, Compensation.BLR.com reported. Since this group is becoming the largest demographic in the country, it’s time for companies to pay attention to what they want.
An employee’s pay reflects how valued an employee feels by an employer. Thus, if an employee feels undervalued, that employee will feel less engaged in their work.
How can you discuss pay? It’s often a tricky conversation for employees and employers to have, but it does not have to be.
First off, most people are actually wrong about how their current pay relates to the market rate. In the PayScale survey, 21% of employees were actually paid above market rates. An unfortunate 83% are paid below market rates.
In a second finding from the study, patterns showed that perceptions about pay played a major role in an employee’s desire to leave a company. In fact, “intent to leave” declined in relation to how favorable an employee felt about their salary. As an illustration, 60% of employees who felt underpaid said they planned to leave, but just 39% of those who thought they were overpaid expressed intent to leave. Therefore, employees should get the message that they are being paid fairly based on the talent market.
Interestingly, honest conversations about pay can actually mitigate a low salary, according to the study. Therefore, if an employer pays lower than the market average for a position, but explains why to the employee, a majority (82%) of employees reported being satisfied with their work. Such communication is especially important in those positions that pay more than $85,000 per year. For individuals who are paid in excess of this number, the intent to leave is more apparent.
The study also looked at gender issues. Women who were paid above market average were 18% more likely to believe that they were underpaid when compared to men in the same pay bracket. This conclusion is probably due to the constant dialogue about the gender pay gap. Though it is true that women earn less than men when all jobs held by women are compared to all jobs held by men, the gap is actually narrower when one looks at the numbers for the same job position. Therefore, open communication is crucial in these situations.
Honesty and effective communication are important in the workplace, especially about salary and pay. Remaining open and transparent with employees is a guaranteed way to ensure greater satisfaction in the workplace.
And it works.
Leah Silber is the CEO and co-founder of Tilde, which is a training and consulting startup with a focus on open source. In a piece by OpenSource.com, Silber stated that Tilde gives back by building and maintaining vibrant open source communities. How does the company do it?
Silber explained that she is a big advocate for practical transparency, as opposed to giving people access to documents. She explains that one of the best ways to have a transparent business is to have transparent salaries. Compensation is usually kept quiet, which makes everyone more likely to negotiate unequal salaries and benefits to obtain good employees. However, with transparent salaries, those in charge of hiring are less likely to offer a crazy salary to a potential employee, largely due to how unfair it would be to the company’s employees. However, the market is always changing, and if a prospective employee wants a higher salary, it may be a sign that it’s time to increase the salaries of employees.
Source: Harvard Business Review
Photo credit: constructionlawsignal.com