In my last post on this subject, I blogged about the two type of issues that generate this type of statement from an employee. I indicated that whenever a manager or an HR Pro hears this statement, it is either a situational based issue or one of circumstance. In this post, I focused exclusively on the situational based challenges that one might face and gave some insight as to how to resolve them. As a quick reminder, the situational based challenges are ones whereby an employee is dissatisfied with their compensation based on workload and/or role/scope creep. These situations are ones that are often well within the organizations control and typically only affect an individual employee. These are typically referred to as internal equity compensation issues. You can link back to this post by clicking here.
This post will focus on the 2nd part of this compensation challenge. That is, when the statement of claim of not being paid enough is one of circumstance. What I am referring to is when an employee, who might not have felt underpaid before, has started to feel this way due to a particular (specific) circumstance or change in circumstance. You often see/hear of this when an employee is talking to their peers who work for similar organizations and/or in similar industries. They get to talking and start to feel that they are underpaid for what they do. They might even begin to look at online salary surveys, refer to professional organizational surveys or even refer to news articles, regional economic factors, etc. These type of compensation challenges are commonly referred to as external equity challenges.
The bottom line is that these types of concerns are circumstance driven and require an “apples to apples” comparison and discussion. When managers and HR Pros get wind of these concerns coming from an employee or employees it requires dialogue and education. Managers will need the direct support of HR to have these types of conversations. It is best to hear the employee out first and try and understand what is driving their concerns. From there you can better game plan the conversation. It has been my experience that in order to gain an understanding with the employee, the manager and employee have to understand:
1) How the organization determines its compensation structure – were job evaluations done, how were pay bands determined, etc. Is the issue one of overall job value or is it where & why the individual employee resides in their pay band? It could even be as simple as letting the employee know that there IS a compensation structure and salaries just weren’t abitrarily determined. Often this goes a long way in the understanding and resolution of the issue.
2) Why the employee is paid what they are for the job that they do – this is a discussion that focuses more on performance and how that has impacted the employee’s movement in the compensation stucture. This is a very employee specific conversation that requires the manager to speak candidly about performance. Often this is a positive conversation if the employee has progressed nicely along their band and resides in the top quartile(s). They need to “see” that they are being paid at the highest levels.
3) Industry data – the manager and HR need to understand where the compensation data is coming from and how it relates or doesn’t relate to your organization. Geography is important as many salaries differ simply based on cost of living The computer programmer you hire in Vancouver will make more than the one you hire in Halifax, Nova Scotia. Likewise, industry is a big driver. If you work in healthcare or environmental services, those jobs will often be paid less than ones in the oil and gas industry (for example).
4) The total compensation package – it is also key to look at things beyond pure salary. A comparative salary difference of $15K might seem like a lot at first; however, if your organization offers flex time, compressed work weeks, professional development assistance, tuition aid, cheap(er) benefits with a retirement plan, an entrepreneurial or innovative work environment and a nice work/life balance, than that might be worth more, comparatively speaking, compared to the $15K more you might get elsewhere but have to work 70 hours a week to earn with the majority of your time spent away from your family.
5) The company’s ability to pay – often people get caught up in just the numbers as it pertains to salaries. However, you also need to compare same/similar organization sizes and profitability. Even within same/similar industries, a Fortune 100 company with 25,000 employees typically has a higher ability to pay than does a 50 person company in its 5th year of existence funded by its original founder/owner. Bottom line, the company’s ability to pay is critical comparative factor when addressing circumstance based compensation challenges. If the organization is coming off a couple of lean years, then they probably aren’t able to pay top quartile salaries. As well, an organization has to be able to balance its books and often providing an employee a greater understanding of the organization’s financial position will help in addressing their compensation concerns. Again, the company is trying to rationalize all this against external factors (circumstance) which makes the conversation that much more difficult.
When faced with circumstance driven compensation challenges, I encourage you to have this open dialogue with your employee(s). Share the facts (as you know them) and make sure to position things appropriately with them. When comparing apples to apples, it may become apparent (to the employee) that they are in fact paid appropriately. However, you should also be prepared that when reviewing factors 1-5 above, you still may have an under compensated employee and you should be prepared to address that issue too.
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