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Many Employees Wrongly Assume They Are Underpaid
Many dissatisfied employees cited inadequate compensation as the primary reason they want to walk out the door. But are these unhappy workers actually underpaid?
From the compensation experts at Salary.com
According to Salary.com's 2005/2006 Employee Job Satisfaction and Retention Survey, 65% of employees plan on looking for a new job in the next three months. Many dissatisfied employees cited inadequate compensation as the primary reason they want to walk out the door. But are these unhappy workers actually underpaid? In order to find the answer, Salary.com analyzed a sampling of compensation data from these supposedly underpaid and unhappy workers, with surprising results.
The compensation experts at Salary.com took the job title, industry, geography, and company size reported by each respondent in the sample. They then matched this data to a benchmark job (and corresponding salary) in the Salary.com database. This analysis revealed that only 18.7% of the self-proclaimed underpaid employees looking to leave their job were in reality underpaid. That means nearly 80% of these workers who felt that they were underpaid actually were not. The majority of these workers, 34.2%, were paid fairly relative to the market, while 17.4% were overpaid.
The other 29.6% of these workers were being paid so far below market range (less than 70% of their job's market value, based on their job title, industry, geography, and company size) that they had most likely been over-titled. Over-titling is a practice, common in the late 1990s, where an employee is offered a trumped-up job title by their employer in lieu of a salary increase. This means that the employee's actual duties at the company may not be on par with the salary level generally associated with their title.
What We Learned
According to Bill Coleman, Senior VP of Compensation at Salary.com, the main lesson in these findings is that "employees should strive to accurately match their job duties to a generic benchmark job title and salary range. This will give them a good idea of what they are really worth in the marketplace, before they make the assumption that they are underpaid and leave their company because of that." Online salary data sites like Salary.com help people accurately price their jobs.
So, Am I Underpaid?
There are three important steps in determining if you are underpaid, steps you should consider before you walk out of your employer's door because you feel as if you are not earning enough money:
Step One: Matching Your Job Description
The most important step in determining if you are underpaid is correctly matching your job to an appropriate benchmark job. A benchmark job is a market job (or external job) to which an actual employee's job (or internal job) is matched for pay comparison. Your job should have similar content, as characterized in the job description, of the benchmark job. Matching your job at least 70% to the benchmark job is a good rule of thumb when trying to pick a match. A benchmark job is what your Human Resource department uses to price your actual job. Benchmark jobs can be found on Salary.com in the Salary Wizard.
Remember, when matching your job to a generic benchmark job, the key is to focus on job description, not job title, as jobs will differ in title across different companies. If you are over-titled, like 29.6% of the employees in our survey who were looking to leave, you will see that your job duties probably do not match the duties of a benchmark job that has your actual job title.
For instance, if your job title is Director of Marketing, but your job duties are a better match to a Marketing Manager, you cannot expect to be paid the benchmark salary associated with a Director of Marketing. This example illustrates the danger in wrongly assuming you are underpaid, and then leaving your company because of it.
Step Two: Matching Your Employer Factors
Once you feel as if you have matched your actual job with a generic benchmark job with the help of the Salary Wizard, you are ready to move on to the next step of the process, which is matching your employer factors to the employer factors of your peers.
The main goal in this step is to match your job to a similar job in your industry, company size, and geography. The fact is that larger companies generally pay more than smaller companies. The industry and geography in which you work will also influence your pay. For example, employees are paid significantly higher in places like New York City, NY than they are paid in places like Brownsville, TX. And places like Toledo, OH will pay on average.
Tools such as The Personal Salary Report will help you find out what your peers who work for employers like yours make for a salary. On Salary.com, this data comes from actual Human Resource reported survey sources in the specific industry, geography, and company size.
Step Three: Matching Your Personal Factors
The Personal Salary Report can also help you with the last step in determining if you are underpaid, which is complementing your industry-, company size-, and geography-matched job with distinct personal factors. The most important personal factors include experience, education, and performance. The more factors you include when building your job, the more accurate your market value will be.
Upon completion of these steps, you will have effectively matched your job to the job of the common employee:
You now have a market salary range for the job that you built. If you are paid below the median base salary (50th percentile), then you are actually underpaid. See our Negotiation Clinic for tips on how to secure the raise you deserve!
Salary.com Survey Methodology
Salary.com invited a cross-section of individual employees and business representatives from across America to participate in its 2005/2006 Employee Satisfaction and Retention Survey. Prospective participants received an e-mail containing the survey questionnaire. Participants completed as many sections of the survey as they desired, and then submitted their results to Salary.com electronically.
Salary.com's compensation professionals reviewed the data for consistency and accuracy, and excluded data that appeared to be invalid, as well as respondents who were unemployed. Of the 15,021 respondents to the survey, 13,592 were considered usable, leaving 1,429 invalids.
Salary.com's team of certified compensation consultants analyzed a sampling (more than 1,600) of responses from self-proclaimed underpaid employees, who are looking to leave their company within the next three months, in order to determine if these dissatisfied employees were actually underpaid.
About Salary.com
Salary.com is a leading provider of compensation solutions providing data, applications, and services to enterprises, small businesses and individuals. The enterprise software helps companies manage their compensation expenditures with real-time, decision-ready data and analytical tools. Backed by a team of Certified Compensation Professionals, Salary.com is your partner in compensation.
- By: Dan Malachowski, Salary.com
