3 Tell-Tale Signs You're Underpaying Your Employees


HR Insights for ProfessionalsThe latest thought leadership for HR pros

Monday, April 8, 2019

Underpaying your staff can lead to some significant problems for businesses, but how can you be sure your employees aren't being fairly compensated for their efforts?

Article 3 Minutes
3 tell-tale signs you're underpaying your employee

How much you pay your employees can be a sensitive area for any business. In one sense, you want to be sure you’re getting the best value from salary expenses; but at the same time, underpaying your staff could mean you lose essential skills and not attract the best in your sector.

Research shows that more than a third of employees cite salary as one of the most important aspects of maintaining a happy relationship with their employer. Indeed, ensuring staff are fairly compensated for their time and effort should be the backbone of developing a positive working environment for all.

It can therefore be a fine balancing act to find the right level of remuneration for individuals and when the scales tip towards underpayment, it can be a slippery slope that's hard to come back from. As a result, here are some tell-tale signs that your policies on salary may need an update:

1. High staff turnover

When your business has a high staff turnover, this an underlying sign that something really isn't quite right. It may not necessarily be money-related, but one thing that can quickly make people uneasy and willing to leave is the realisation that they could be getting paid more elsewhere.

If your business continues to witness high turnover rates due to low pay, this can be a demoralising fact for existing employees; at the same time (and perhaps more worryingly for the business) it can lead to a poor reputation and an inability to attract new talent. Both of these issues need to be addressed as soon as possible.

2. Poor team morale

Money isn't everything, but it does have a big impact on how many people feel about their job and the level of appreciation that a company has for them.

When people feel they’re being paid their market value, they’re more likely to go that extra mile, as they appreciate they receive fair compensation for their time and effort.

However, when the pendulum swings the other way and employees feel underpaid, this can result in poorer performance, a breakdown in team morale and poor worker wellbeing.

3. Market research says so

It's actually quite easy in today's modern world to identify whether or not you are underpaying your staff, in many cases this information can be just a few mouse clicks away.

Sites like Glassdoor allow organizations to benchmark their staff's pay against their wider industry average. Meanwhile, searching online for companies recruiting for employees of similar experience and skills to your own will highlight any disparities in how much your business offers its staff.

What can underpaying staff mean for your business?

In the end, when people feel they’re being underpaid and the company does nothing to address this fact, many will simply leave. This can lead to high turnover rates and this, in turn, can impact the company as a whole.

When businesses recognize that paying higher salaries to staff can result in improved productivity, loyalty, reputation and morale, the benefits of updating salary pay scales should begin to make sense.

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