Be Careful What You Pay Employees

Pete Ross

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“You don’t get paid what you deserve, you get paid what you can negotiate.”

That was said by Ramit Sethi, one of my favourite guys online who covers psychology, money and a bunch of other things. Anyone with a pulse and an IQ over 80 can see it played out in the job market and in their career, where they either had to fight to be paid what they were worth or see themselves paid below the market rate. Unfortunately the latter often get stuck in a miserable state of comfort because it feels too hard to get another job whilst simultaneously knowing that their equivalent somewhere else gets paid more.

We can all see the truth of that statement, but there’s something about it that really rubs me the wrong way. All the emphasis here is put on the individual to be the best negotiator possible and if they’re not, well tough luck buddy, it doesn’t matter how good you are, you get paid what you could negotiate for. On an employer’s part, this is woefully short sighted, not to mention unfair and mean spirited. The unfair and mean spirited is pretty obvious — you’re saving money for your company whilst at the same time making it more difficult for that person to live. If it’s below the market rate, I think mean spirited takes on a whole new meaning.

It’s short sighted because you’re playing a very dangerous game. You have those in the workplace who will always do an average job because they’re apathetic about work in general. You also have the reliable “B” players who will do their thing day in, day out and act as the backbone. The “A” players though? They’re the ones who are always trying to improve themselves, improve their output and change the things that need changing. They’re always out there looking for the next advantage. They’re the ones who will keep your business at the forefront.

So if you’re going to pay them below the market rate, you’d damn well better keep them happy. Happy people won’t look for work elsewhere because they’re happy. It doesn’t take much though. A new supervisor who micromanages, poor performance of the company, new policies — it could be the smallest thing that pisses them off, but rest assured that one day they’ll have a look just out of curiosity. They won’t even be actually thinking about leaving, it’s more like a peek over the fence to see how green the grass it. If you’re paying 10% below the market, it probably won’t be a big deal for them if they really like working there. If it’s 20% or more, you have a problem.

No one is staying in a job for 20% less pay. Let’s quit with the “employees don’t leave jobs because they aren’t paid enough” tripe that I’ve heard dimwitted HR professionals spout. It’s not true. 20% more pay means a lot in any economy and makes life a hell of a lot easier. The real problem though is if you’re 20% or more underpaid, it isn’t just about the money, it’s about a sense of betrayal. Your company isn’t just undervaluing you, they’re sticking it to you. They’re at the poker table acting like they have a full house when in reality, they’ve got a pair at best. If you’ve asked for a raise in the past and been denied, that sense of betrayal is going to be even greater.

What happens then, when that single “A” player finds out how underpaid they are? They’ll get another role. They’re an “A” player after all. And either before or after they leave for that role, they’ll tell the rest of the team. Now you’ve got a problem. The absolute best case scenario is that one of them raises it and demands the market rate, you realise the error of your ways and you give everyone on the team a raise. Problem solved, right? Well, not necessarily. They’ll be happy, sure, but it’s going to get around the company soon enough. Now, everyone is going to be looking at their worth on the market. Some will leave, others will request raises. Either way, no one is going to forget it. You’ll get stung because it will get around in your industry that you underpay your staff.

Worst case? The above happens after you lose all your “A” players and some of your “B” players. Just hope that it’s not a critical team that you’ve decided to underpay, otherwise you’re going to be either underpaying and filling the roles quickly with whoever you can get, costing you business, or you’re going to pay through the nose for better people.

Underpaying staff is a very Dickensian move, akin to the industrialists of that era who saw their workers as nothing more than dollar signs to be exploited for maximum gain. If you do this in today’s world, you are every bit worse than them, and you embody the concept of stepping on people to further yourself. But apart from treating people horribly, it’s also stupid. In today’s world where competition is high and you need the best people, it’s the equivalent of stepping over a $50 note to pick up a nickel. You’ve gained something, but at what cost? When the chickens come home to roost, you’ll realise that you’ve paid far more in the long run because you wanted to cheap out early on.

If you’re an employee, know your worth. Don’t ever get complacent and assume you’re being paid well. Check glassdoor.com and look at job openings. Go and interview once or twice a year as well, just so you know what you deserve on the market. Don’t stay somewhere that you know is underpaying you either just because it feels too hard to change jobs. Don’t be a victim.

If you’re an employer, consider yourself on notice. Your cost cutting at the expense of people who deserve to be fairly paid in order to save some money for your company is despicable. It may not cost you today, but the longer it happens, the bigger the price is going to be.

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I write about career, performance, psychology, self development and business humour. I'm an author, former national competitor in judo and strongman and a former military instructor.

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