Feeling underpaid at work is no fun, especially considering that we spend so much time throughout our lives working. In this article, I’ll share some tips for figuring out whether you’re underpaid – and what you can do about it.
Quick statistics about being underpaid at work
According to a survey by staffing company Robert Half, 46% of American employees feel underpaid at work. Those in the following cities were also more likely to report feeling underpaid:
- San Diego (62%)
- Austin (54%)
- Houston (53%)
- Nashville (53%)
- Philadelphia (52%)
Now, feeling underpaid is one thing. But are so many people really being shortchanged at work? Payscale data published in the Harvard Business Review sheds some interesting light on this.
According to the data, 35% of those paid above market believe they’re underpaid. Meanwhile, 64% of those paid at market believe they’re underpaid. Lastly, those who are actually paid below market are pretty good at picking up on it; 84% report feeling underpaid.
Here’s the thing, though. Feeling underpaid at work is a problem even if you’re paid at or above market. It means you likely have other gripes about your job and would like additional compensation in exchange for putting up with them. Hence, many of my tips in this article will apply even if you’re not actually underpaid but rather just dissatisfied.
How to tell if you’re being underpaid at work
Seek out other offers and compare them to your current wage
Average and median salary data for your role can be helpful. You’ll never really know whether you’re being compensated fairly, though, until you apply for similar work at other companies and receive competing offers. I say this for two reasons.
First, people with your job title may be paid a certain amount on average. But there’s more to compensation than just your job title. Employers will also look at your qualifications and experience, which are unique to you. For a true apples-to-apples comparison, see what offers you can get.
Second, there are qualitative factors worth considering when gauging whether you’re underpaid. For example, a different company may offer you the same salary but with fewer responsibilities and a lighter workload. This is still a sign your current company is underpaying you; they’re getting more out of you than at least one other company would expect for the same money.
Consider how long you’ve been at your current company
Data shows that workers who stay with their employers for more than two years typically earn less. It’s no small difference, either; as Forbes reports, these workers see their compensation slashed by roughly 50% or more on average.
I recently saw a very dramatic example of this. A friend of mine was making $90,000 doing systems administration at a warehouse. He’d been at that company (and not even in the same role – he started out at a much lower level) for more than 10 years. Recently, he applied for a similar position at a different company. When all was said and done, that new company offered him $240,000 – more than twice what he was being paid by the employer he stayed loyal to for over 10 years.
This scenario is common (albeit not always as drastic) for a reason. According to Investopedia, a typical raise at most companies is 3% to 5%. Raises that small often fail to keep up with the fair salary growth for in-demand professions – especially when you consider that the typical worker sees their list of responsibilities grow longer and longer as their tenure at a single company goes on. Two years in, they’re likely providing much more value than they signed on for. Consequently, they’re almost certainly underpaid by that point.
Look online (but take that data with a grain of salt)
To expand on a point I mentioned earlier, median wage statistics can be helpful but you should take them with a grain of salt. Medians and averages can be deceptive.
For example, let’s say the median pay for your job title and region is $80,000. That simply means half of the workers analyzed make less than that amount and half make more. So if you’re an exceptional performer, you shouldn’t settle for the median salary. You’d be underpaid. Conversely, if you’re a mediocre performer, you shouldn’t expect to earn the median salary for that position. You’d be overpaid.
Still, there are some ways you can increase the accuracy of your research.
Looking at salaries in your particular city is a big one. What constitutes a decent salary can vary wildly from state to state, even for identical work.
You should also use properly researched data sources rather than relying on anecdotal evidence (i.e. a friend who claims they know somebody that does the same job as you yet makes more). The U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook is a great resource if you live in the United States. Statistics Canada has a similar tool here.
Consider your company’s turnover rate
If your company struggles to retain workers, this is a strong indication something’s off compensation-wise.
If workers are constantly quitting, for example, it’s likely they’re finding better opportunities elsewhere. After all, people don’t usually up and leave companies en masse unless they know something better is out there.
If workers in similar positions as yours are constantly being fired for poor performance, that’s a clear sign you’re likely underpaid as well. It suggests your company is having a hard time attracting candidates capable of performing at the required level – likely because it isn’t offering high enough salaries.
Compare your salary to that of different job titles requiring similar skills and experience
One thing I haven’t mentioned yet is that it’s possible to receive a fair salary for your current job title yet still be underpaid. How? Well, some job titles simply don’t command as much pay as others requiring a similar skill set and level of experience.
For example, journalists are notoriously underpaid for their work while those in communications and public relations roles utilize a nearly identical skill set to earn substantially more. This is why it’s important to evaluate your salary not just in the context of your job title but also your skills and experience. If your goal is maximizing your earnings, start by making sure you’re in the right role and industry. If not, pivot elsewhere.
If you’re in a passion-fueled industry, your salary is likely lower than it would be if you worked in a field people pursue for more pragmatic reasons.
For example, I met so many people in journalism school who went down that path because they grew up watching the news and always wanted to tell interesting stories on TV for a living.
Meanwhile, no kid dreams of writing boring corporate press releases and emailing them to disinterested outlets all day.
Consequently, there are so many journalists willing to accept low pay in exchange for living their dreams whereas companies hiring communications professionals can’t rely on that same passion factor.
Compare your company’s growth to that of your salary
If your total compensation (including salary, benefits, and other perks) hasn’t grown at a reasonable rate relative to your company’s success, you’re being underpaid.
Of course, it’s important to remember that business owners take substantial risks and profit off the spread between expenses (including payroll) and revenue. In other words, it’s unreasonable to expect that every dollar of productive output on your part will lead to a dollar in pay.
However, it’s also unreasonable when business owners gobble up the profit rather than spending some of it on raises and other efforts to create a better work environment (i.e. new hires to support early employees who worked harder than they would’ve at a larger company to produce results).
When business owners behave selfishly this way, employees are often left working even harder to run their now-larger companies. In other words, the stakes get higher but their compensation stays more or less flat.
If you’re in this position, you’ll likely find there are other employers willing to compensate you fairly for a job well done.
Consider the level of employee satisfaction within your company
Look around you. Do people seem miserable at work? If so, compensation likely isn’t hitting the spot. After all, according to a SHRM survey, compensation is the top-rated factor influencing job satisfaction.
Based on my experience, this holds true even if there are other serious issues with the work environment. People are willing to put up with a lot (including terrible bosses and colleagues) if they feel fairly compensated. Those things really bother workers that feel underpaid, though. Consequently, those workers seem more likely to express dissatisfaction rather than bite their tongues and put on happy faces.
How to react upon realizing you’re underpaid at work
So let’s say you’ve gone through the list above and concluded that you are, indeed, underpaid at work. Here are some tips for rectifying the situation without blowing up your career in the process.
Don’t become a vocally disgruntled employee
No matter how badly your employer is underpaying you, resist the urge to complain about it to others in your professional network. That includes not only your colleagues and superiors but also anyone else in the industry.
I recommend keeping your mouth shut for two main reasons.
First, you agreed to work at your current rate. I presume nobody held a gun to your head and forced you to accept underpayment rather than shopping your resume around or asking for more money. You’ve got to accept responsibility for failing to do those things.
Second, nobody likes a complainer. Most industries are small enough that you will encounter many of your current professional contacts again in the future. You don’t want them to go, “oh yeah, that’s the guy who whines about deals nobody forced him to make” whenever your paths cross again.
Do voice your concerns once you have a competing offer you’re ready to accept
When you ultimately approach your boss with the fact you’re underpaid, it helps to have supporting evidence. Among the strongest forms of that would be a higher competing offer you’re prepared to accept.
If your current company really wants to keep you, nothing will jolt them into action faster than the threat of you taking that competing offer and leaving. If they can’t (or are unwilling to) match it, you can walk away.
Without a competing offer, you have less leverage. In fact, your company may decide to find a replacement who will be happier at that salary. You’d then be left scrambling to find a job from a position of weakness.
Avoid expressing outright dissatisfaction with your job when attempting to negotiate a higher salary. Even if your request is granted, your superiors will likely remember your dissatisfaction and be on the lookout for opportunities to replace you.
There’s no need to state the obvious if you have a stronger offer in hand. Most people in business are capable of doing simple math. If they can’t match what you’d be paid elsewhere, you’re obviously going to leave.
Don’t go into your compensation review meeting unprepared
Even if you have a strong competing offer in hand, prepare a few other points before asking your current employer for a raise. ZipRecruiter recommends collecting data on:
- your achievements
- new tasks you’ve taken on
- how happy clients and colleagues are to be working with you (i.e. emails from them stating such)
- exactly how your work has benefited the company financially and otherwise
Even if you’re denied a raise, a strong presentation will at least make your reasons for leaving clear. As I mentioned earlier, most industries are small enough that you’ll encounter professional acquaintances many times over the course of your career. You don’t necessarily want to be known as someone who leaves purely for financial reasons. Being known as someone who confidently delivers value and expects to be compensated for it is better.
Be prepared for pushback when you ask for a raise. Keep in mind, it’s much easier to deal with this pushback when you have a competing offer (see my previous point). Without an alternative in place, you may cave sooner than you should for fear of losing your job.
Don’t push for a counter-offer if you have no intention of staying
Salary negotiations often don’t end after an employee makes a convincing request. Rather, your superiors typically need to do some legwork in order to get that request approved. That may include sticking their necks out with their bosses.
Don’t put your boss through that if you’d be inclined to leave even if they came back with a strong offer compensation-wise. There’s nothing wrong with saying you found a role that better meets your needs and leaving it at that. You’re less likely to burn bridges on the way out with that approach.
Feeling underpaid at work is quite common. I hope this article has left you with some tips for determining whether you actually are underpaid and, if so, what you can do about it.
Read more of my career-related articles here.