How to deal with employees unhappy about their pay
During my senior year of high school, I held a part-time job loading 50-pound sacks of fertilizer and garden supplies onto large trucks. We were paid by the hour until the job was completed. There were three of us: my buddy, an elderly General Motors assembly worker and me. I was anxious to impress and worked hard and quickly my first evening. The second night, the GM worker cornered me and said sternly, “We work slowly here, get it?” He didn’t say we did this to make more money, but that was obvious.
This behaviour is not limited to physical labourers. A colleague of mine works in a management-consulting firm. Most of his clients are government agencies. They set what he considers a very low limit on how much his firm can charge per hour. He plays the game by saying the project will take more hours than it actually does.
Several years ago I was consulting for a small utility in New England. Most of the unionized workforce had been with the organization for years. Their biggest complaint was the pay was too low. They told me, “We just go through the motions on Fridays, not doing any actual work because our paycheque only really covers us for four days.”
The problem for employers
Many employees feel they are inadequately compensated for their work, believing they are paid unfairly compared to others performing similar work in other organizations. Therefore they may feel justified in engaging in unethical behaviour to compensate. This includes falsifying time sheets and even stealing from their employer.
The truth is most employees have very little idea about how their compensation compares to other organizations. Work rules, benefits, time-off policies and many other factors vary widely among organizations, making it difficult to compare apples to apples.
Employees assess the adequacy of their pay on many pieces of usually unreliable information. Some rely on what former co-workers tell them they are making at their new jobs. Whether the departed employees were truthful about their current compensation is unknown. Others cite the salary they saw listed in the newspaper for a similar job but have no way of knowing if the job is really comparable or how the total compensation package compares to their current job. Even salary surveys are an inadequate method for employees to compare their pay to that of other organizations. The results depend on which organizations chose to participate in the study and may not reflect the differences in cost of living or job responsibilities.
Although individual pay levels are kept secret in most organizations, many employees feel they are paid unfairly compared to others performing similar work in their own organization. In many cases these perceptions of “internal pay inequity” are inaccurate. However, whether real or imagined, this can result in resentment and poor teamwork.
The psychology of it all
Since pay levels are secret and employees rarely share this information, they base their views about internal inequity on two, often inaccurate, perceptions. First, in any work group there are usually one or two people who are viewed as poor performers. Employees assume these co-workers are earning the same pay they earn. This may not be true.
Second, most employees feel their own performance is above average. Therefore they feel if their pay is only average, that means they’re being paid the same as less deserving employees. This too may not be true. Also, their perception about the superiority of their job performance may be inaccurate.
Pay is important to employees, of course, because it allows them to provide for themselves and their family and they equate it with respect and recognition. It is an invisible badge they wear for the world to see and, for many, it has a major impact on their self-esteem.
Noted psychologist Frederick Herzberg and his colleagues describe pay as a “hygiene factor” — no more important than the office furniture, lights and temperature. According to Herzberg, “hygienes” can’t motivate or satisfy employees. They can only be a source of dissatisfaction.
Five solutions
Clearly state pay philosophy. A pay philosophy is a simple statement about how an organization pays relative to the market. Stating such a philosophy makes it clear to employees and job applicants how they can expect to be paid. For example, a common pay philosophy might be, “We pay at or above the market level of pay in similar organizations in our area.” The more specific the policy, the better, such as: “We pay at the 75th percentile for other mid-sized life insurance companies in downtown Vancouver, as reported in the annual ABC salary survey.”
Some organizations make it clear to applicants and employees they pay below the market. For example, non-profit organizations are typically poor payers. Many employees are willing to live with the lower pay because they believe strongly in the mission of the organization.
Other organizations say they pay below the market but offer other benefits instead. For example, one pharmaceutical research company pays below market rates for research scientists, but offers a family-friendly atmosphere. Leaving at 5 p.m. is accepted and encouraged. Taking time off to attend a child’s soccer match during the workday is also accepted. The employees all knew when they accepted positions with the company that they were sacrificing pay for a better lifestyle.
Avoid paying by the hour. I work with a computer professional to help me purchase equipment, install software and solve problems that periodically occur. He used to charge me by the hour. When he helped me, it often seemed like we were focusing on time rather than results. I was looking at my watch and he undoubtedly was looking at his. The faster he was able to solve my computer problems, the less money he made. It just didn’t make sense to me. We changed our arrangement so that I now pay him a monthly retainer, which is much more satisfying for both of us.
Whenever possible, pay your employees for deliverables and results, not their time. Wouldn’t it make sense to pay a salesperson who only works half-time as much as one who works full-time if they both achieved the same level of sales?
Use bonuses rather than pay increases. Properly administered, bonuses can be much more motivating to employees than salary increases. They are also less expensive, because they don’t commit the organization to an increased level of pay every year.
Train supervisors how to talk about pay. It is important to convey the appropriate messages to employees about pay. Don’t undermine a compensation program by apologizing when you offer a pay increase that is not as high as the employee would like. Instead of expressing regret, talk about why they are being given a pay increase.
Weed out ineffective performers. If poor performers earn the same as good performers, it signals to good performers the quality of their work doesn’t affect their pay.
Pay is important to employees and many are unhappy about it. They hate management for not paying them more. But giving everyone a raise is usually not possible and would probably not solve the problem anyway. Instead, organizations can improve the way employees feel about their pay by better communicating a specific pay philosophy and demonstrating to them that their hard work will be rewarded.
Bruce Katcher is an industrial and organizational psychologist and founder and president of consulting firm Discovery Surveys in Sharon, Mass. The above is an edited excerpt from his recent book 30 Reasons Employees Hate Their Managers.
This behaviour is not limited to physical labourers. A colleague of mine works in a management-consulting firm. Most of his clients are government agencies. They set what he considers a very low limit on how much his firm can charge per hour. He plays the game by saying the project will take more hours than it actually does.
Several years ago I was consulting for a small utility in New England. Most of the unionized workforce had been with the organization for years. Their biggest complaint was the pay was too low. They told me, “We just go through the motions on Fridays, not doing any actual work because our paycheque only really covers us for four days.”
The problem for employers
Many employees feel they are inadequately compensated for their work, believing they are paid unfairly compared to others performing similar work in other organizations. Therefore they may feel justified in engaging in unethical behaviour to compensate. This includes falsifying time sheets and even stealing from their employer.
The truth is most employees have very little idea about how their compensation compares to other organizations. Work rules, benefits, time-off policies and many other factors vary widely among organizations, making it difficult to compare apples to apples.
Employees assess the adequacy of their pay on many pieces of usually unreliable information. Some rely on what former co-workers tell them they are making at their new jobs. Whether the departed employees were truthful about their current compensation is unknown. Others cite the salary they saw listed in the newspaper for a similar job but have no way of knowing if the job is really comparable or how the total compensation package compares to their current job. Even salary surveys are an inadequate method for employees to compare their pay to that of other organizations. The results depend on which organizations chose to participate in the study and may not reflect the differences in cost of living or job responsibilities.
Although individual pay levels are kept secret in most organizations, many employees feel they are paid unfairly compared to others performing similar work in their own organization. In many cases these perceptions of “internal pay inequity” are inaccurate. However, whether real or imagined, this can result in resentment and poor teamwork.
The psychology of it all
Since pay levels are secret and employees rarely share this information, they base their views about internal inequity on two, often inaccurate, perceptions. First, in any work group there are usually one or two people who are viewed as poor performers. Employees assume these co-workers are earning the same pay they earn. This may not be true.
Second, most employees feel their own performance is above average. Therefore they feel if their pay is only average, that means they’re being paid the same as less deserving employees. This too may not be true. Also, their perception about the superiority of their job performance may be inaccurate.
Pay is important to employees, of course, because it allows them to provide for themselves and their family and they equate it with respect and recognition. It is an invisible badge they wear for the world to see and, for many, it has a major impact on their self-esteem.
Noted psychologist Frederick Herzberg and his colleagues describe pay as a “hygiene factor” — no more important than the office furniture, lights and temperature. According to Herzberg, “hygienes” can’t motivate or satisfy employees. They can only be a source of dissatisfaction.
Five solutions
Clearly state pay philosophy. A pay philosophy is a simple statement about how an organization pays relative to the market. Stating such a philosophy makes it clear to employees and job applicants how they can expect to be paid. For example, a common pay philosophy might be, “We pay at or above the market level of pay in similar organizations in our area.” The more specific the policy, the better, such as: “We pay at the 75th percentile for other mid-sized life insurance companies in downtown Vancouver, as reported in the annual ABC salary survey.”
Some organizations make it clear to applicants and employees they pay below the market. For example, non-profit organizations are typically poor payers. Many employees are willing to live with the lower pay because they believe strongly in the mission of the organization.
Other organizations say they pay below the market but offer other benefits instead. For example, one pharmaceutical research company pays below market rates for research scientists, but offers a family-friendly atmosphere. Leaving at 5 p.m. is accepted and encouraged. Taking time off to attend a child’s soccer match during the workday is also accepted. The employees all knew when they accepted positions with the company that they were sacrificing pay for a better lifestyle.
Avoid paying by the hour. I work with a computer professional to help me purchase equipment, install software and solve problems that periodically occur. He used to charge me by the hour. When he helped me, it often seemed like we were focusing on time rather than results. I was looking at my watch and he undoubtedly was looking at his. The faster he was able to solve my computer problems, the less money he made. It just didn’t make sense to me. We changed our arrangement so that I now pay him a monthly retainer, which is much more satisfying for both of us.
Whenever possible, pay your employees for deliverables and results, not their time. Wouldn’t it make sense to pay a salesperson who only works half-time as much as one who works full-time if they both achieved the same level of sales?
Use bonuses rather than pay increases. Properly administered, bonuses can be much more motivating to employees than salary increases. They are also less expensive, because they don’t commit the organization to an increased level of pay every year.
Train supervisors how to talk about pay. It is important to convey the appropriate messages to employees about pay. Don’t undermine a compensation program by apologizing when you offer a pay increase that is not as high as the employee would like. Instead of expressing regret, talk about why they are being given a pay increase.
Weed out ineffective performers. If poor performers earn the same as good performers, it signals to good performers the quality of their work doesn’t affect their pay.
Pay is important to employees and many are unhappy about it. They hate management for not paying them more. But giving everyone a raise is usually not possible and would probably not solve the problem anyway. Instead, organizations can improve the way employees feel about their pay by better communicating a specific pay philosophy and demonstrating to them that their hard work will be rewarded.
Bruce Katcher is an industrial and organizational psychologist and founder and president of consulting firm Discovery Surveys in Sharon, Mass. The above is an edited excerpt from his recent book 30 Reasons Employees Hate Their Managers.
