When my team and I are doing an analysis on employee pay, we are always looking for employees who are under or overpaid.
When I find people who are overpaid, I ask questions:
Do they have a rare level of expertise in something that caused the employer to pay them this much?
Were they demoted from a higher-level job and the employer didn’t reduce their pay?
Are they the CEO’s grandson and they got a special deal? (It happens.)
Did the employer use a consistent set of factors when making the pay decision as a new hire?
Did the employer pay whatever it took to get the person to say yes to the job offer, because they had a turnover problem?
When I find employees who are underpaid, I ask:
Did the employer hire them 3 years ago and never give them a pay increase?
Did the employer give them a low offer as a new hire and celebrate the “win” of getting them at a bargain price?
Did the employer hire a high performer (unknowingly)?
Did the employer give this employee more and more responsibilities without a promotion or pay raise?
Was the merit budget for the last few years low? Did the employer not provide competitive annual merit increases?
Is the employer’s process for assessing performance or potential biased? How was that used in determining this employee’s pay?
Did the employer use a consistent set of factors when making the pay decision as a new hire?
Did the employee not negotiate at the job offer stage?
Does the employer do a pay equity audit annually? What methodology do they use?
AND…
Does the employer have grades and base pay ranges assigned to each job? What about incentives?
Are the base pay ranges consistently used in the pay decision making process?
Are the incentive targets consistent by job or do they vary by employee?
Are pay decisions centralized or decentralized?
Employees want to trust their employers. If you are an employer and you can’t embrace pay transparency and communicate openly to your employees, we should talk.
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