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Your Boss Can Talk You Into Loving Your Salary

Underpaid employees feel better about their compensation when their bosses talk to them about it.

All workers think they should be getting paid more—that's nothing new. But two recent reports suggest employers may not have to compensate their workers well to keep them happy.

A survey of 71,000 employees in the U.S. by PayScale, a website that tracks salaries, showed that employees who were underpaid—that is, paid less than the market rate for their position—were more satisfied with their work when their company was transparent about compensation. The percentage of underpaid employees who were satisfied with their compensation jumped to 82 percent from 40 percent when a manager simply sat down and discussed their pay.

On the other hand, 64 percent of employees who were paid fairly (at market rate) believed they were underpaid, and would consider looking for higher-paying work elsewhere. The research shows that dissatisfied employees left even if their pay went up.

"There is a huge disparity of information," said Tim Low, vice president of marketing at PayScale. "It used to be that employers had all the information when it came to compensation, and employees had the least."

With salary data more readily available online, it's easier for employees to learn what their colleagues might be making, he said. That should motivate companies to clarify what they're paying and why, especially since the report shows most employees' expectations are off. 

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PayScale

Even though it's easier than ever to look up pay rates, most workers don't understand how their paycheck compares to the market rate. 

The most confused employees were the ones paid above market rate. About half of this group felt they were being paid at the market rate, and a third of them said they were underpaid. Only 21 percent of the people in this group knew that they were taking home a higher-than-market paycheck.

The only people that overwhelmingly got it right were the underpaid workers. Of that group, 83 percent knew they weren't paid at market rate. 

"Fixing the perception gap in pay doesn’t cost any money for companies," said Low. "But it requires companies to teach managers how not to run away from the conversation."

It's relevant news for companies, which worry about how to keep their best employees. In a separate PayScale survey of 5,530 companies about how they were compensating workers, 63 percent of employers called retention their top concern.

Still, less than half of the companies PayScale surveyed train managers on how to have tough conversations with employees about compensation. One way to make those conversations go smoothly, said Low, is to provide benchmarks for the different positions offered at the company, with salary ranges to show employees where they fall in the spectrum. Giving real-time salary data is also useful; however, companies would have to invest in systems that track the market rate for salaries. 

The survey also showed most companies weren't openly talking about pay. As of this year, less than half of employers said they had or are working on improving transparency with new salary tracking software or manager training. 

Companies concerned about holding on to their most valuable employees are incorporating more feedback into their management styles. The annual performance review is being ditched, in many places, for more frequent discussions about compensation and ways to change your pay like acquiring more skills, said Low. "There's not this magical one-year cycle," he said. If companies wait up to a year to discuss giving their star players a raise, they may find those stars are already on their way out. 

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