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September 1, 2014

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Pay Dissatisfaction
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Pay Dissatisfaction

60% of employees are dissatisfied with their pay.

Part 1 - THE PROBLEM:

Pay dissatisfaction can lead to:

  • Decreased motivation;
  • Increased turnover;
  • Decreased morale; and
  • Poor quality work.

Part 2 - WHAT MANAGEMENT CAN DO

Organizations should recognize that pay dissatisfaction cannot be totally eliminated. Even in very high paying organizations, some will harbor concern about their pay. There are, however, many measures that can be taken.

There are three major sources of pay dissatisfaction. Each are described below along with our suggestions for improving the situation.

  1. Dissatisfaction With the Pay Structure

    Solutions:

    • Eliminate clear inequities - Routinely make adjustments to the system to fix clear inequities. Adjusting even just one employee's pay can have a major impact on how others perceive the compensation program.

    • Communicate how pay is determined - Communicate how individual pay is determined including: what percentage is based on organizational performance, what percentage is based on individual performance, and what are the pay grades?

    • Revisit the pay secrecy policy - These policies may be causing more harm than good. Secrecy can lead to misperceptions by employees about where they fit in the structure.

  2. Dissatisfaction With the Pay Level
    The second source of pay dissatisfaction is that the grass looks greener in other organizations. Sixty-two percent feel they would receive more pay for doing the same work elsewhere.

    Solutions:

    • Establish and communicate your pay philosophy. - Organizations should decide the level of pay they feel comfortable paying (i.e., above the market, at the market, or below the market). For example, a pay philosophy statement could be: "to pay at the mid-point for other organizations in our industry and our geographic area."

    • Conduct a salary survey. - Salary surveys can provide management with a basic understanding of how well they are paying compared to other organizations. However, be careful in using the results. Salary survey data rarely reduces employee concerns about their pay. Common complaints include: "the wrong comparison organizations were used," "our organization is unique," and "the cost of living is higher here."

    • Make certain employees know that pay is just one part of their total compensation. - Annual total compensation statements should be provided to all employees that clearly show that their total compensation is far greater than what they see in their paycheck.

    • Carefully manage the messages supervisors transmit to employees. - First line supervisors often sabotage the pay plan by telling employees that their pay is low. Supervisors should be trained as to what to say about employee pay, how to say it, and what not to say.

  3. Dissatisfaction With Merit Increases
    The third source of pay dissatisfaction is the lack of a clear relationship between job performance and pay increases.

    Solutions:

    • Eliminate across-the-board increases. - A larger percentage of pay should be based on individual merit.

    • Make certain performance reviews are conducted. - We have seen that when supervisors conduct performance reviews on a regular and timely basis, employees feel better about the linkage of their pay to their job performance.

    • Manage ineffective performance. - Many organizations do not do a good job of disciplining, retraining, or terminating those who are clearly not performing their jobs well. This is de-motivating to others and makes them skeptical of the pay system.

    • Use other types of rewards for good performers. - Recognition, opportunities for training, and interesting assignments can all be strong motivators.

- Bruce L. Katcher

Bruce Katcher, PhD is President of Discovery Surveys, Inc. His firm conducts customized employee opinion and customer satisfaction surveys. Learn more at www.DiscoverySurveys.com. He can be reached at BKatcher@DiscoverySurveys.com or 888-784-4367.

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