A recent NY Times article addressed a question on the subject of feeling short changed by a pay raise that went hand in hand with a promotion. In this article, the questioner remarks that their friend has been recently promoted and “asked for the same salary she thought others at this new level received”, however, after salary negotiations, the reader’s friend still walked away “feeling slighted”.
The author goes on to explain the innate desire for fairness in salary negotiations, and, quoting a University of Pennsylvania professor, notes:
“There are multiple ways we think about how we should pay people. One way of thinking is that job X pays salary Y, and that is that. But another perspective is that an employer pays for qualifications—experience, skills, education—with an eye toward a worker’s demonstrable history and potential long-term contribution. And a third is that we pay what the market dictates: You are “worth” the best offer you can actually get. So if you think that is more than what you are being offered right now, you are welcome to prove it.”
The New York Times author has hit the nail on the head here, calling out the fact that an individual’s understanding of how pay decisions are made can have a profound impact on whether or not they feel that salary offer is fair and equal. There’s a number of things that may cause newly promoted employees to feel shortchanged after a salary bump—here’s how to handle a few:
An employee believes that they are being offered less than peers in that same role
While it has been taboo in the past to discuss pay amongst coworkers, continued trends in salary transparency and laws allowing employees to discuss pay, have pulled back the curtains on peer to peer pay equality. It is now reasonable to expect that employees may be talking to each other about pay—but don’t forget that they may not be getting the full story.
An employee who’s heard a little bit about what people in their new role make may not know what specifics went in to the decision making for each of those individuals. This is where you come in. While this doesn’t mean you need to divulge information about salary decision making for other employees, it does mean that a transparent conversation about the pay range for the role, and where this employee’s promotion puts them in that range (and WHY), is very warranted.
Talking to employees about the salary decision making process for their role is a must. While you’re at it, set up similar conversations with new employees about requirements for promotion, career path options, and how your organization evaluates and rewards performance and tenure.
The employee feels the promotion and pay raise are overdue
It is common to align a newly promoted employee’s salary at the ‘starting end’ of the salary range for that job, however, employees that have been pushing (or patiently waiting) for a promotion may have good reason to believe that they have already been doing some of the work of their new job as an ‘audition’ for that role. An employee that has been doing a very similar job leading up to their promotion may likely feel that they are more than equipped to hit the ground running and feel that they should be paid accordingly.
It’s important for the employee and the employer to get on the same page in this situation. If this is an individual who has indeed stepped up to take on additional duties, fill in as in interim replacement, etc.—acknowledge that. It may be the case that your organization considers this an opportunity for an individual to ‘prove themselves’, but for an employee, it can feel like they’ve already been doing that job with no raise, so the one they’re getting now ‘better be good’.
As usual, the reality here is somewhere in between these two perceptions. Communicate with your employee about how the promotion is indeed due to them having displayed their ability to take on this job, and explain how the decision was made about what is being offered for their salary increase. How pay decisions are communicated can be just as important as the actual number on an offer when it comes to perception of fairness.
Lastly, be open to listening if an employee believes that they’ve put in the work to warrant a heftier increase—this is, after all, someone you believe in enough to promote.
Your employee has received a higher offer for a similar outside role
On the surface, this one’s a ‘no brainer’. Employees who have been offered more money from a talent competitor are most certainly going to feel undervalued and short changed if your promotion offer does not line up. While some employers are of the mind that employees who are entertaining outside offers aren’t worth retaining, I implore you to dig a bit deeper before cutting your ties.
Was there any communication to this employee that there was a promotion available and they were in line for it? Did this employee start looking outside your office because they are truly unhappy at your organization or because they felt they had no other options for growth? Before digging in to salary negotiation, get real with your employee about whether or not this promotion is the right move for them.
If you both agree that this role is the right fit— it’s time to talk about salary, and a lot more.
First off, it’s essential to communicate how the salary for that role in your organization is benchmarked. You need to help the employee understand that how pay aligns to the market in your organization may not be apples to apples with how the competing organization benchmarks jobs in their company. Secondly, if you’re not communicating with employees about variable pay, benefits, and other pieces of their total compensation—you’re in trouble. A holistic discussion about the total rewards offered for a promotion is crucial.
Finally, keep in mind that many organizations put a lot of emphasis on attracting talent, rolling out the red carpet to ‘sell’ potential candidates on their organization. If you are in the position of negotiating with an employee put yourself in that mindset—your current employees deserve to be wooed too!
Next time you find yourself ready to talk about a promotion with a well deserving employee, keep in mind that transparency and information are the pillars of any good compensation conversation. Follow these tips and get ready for both you and your employee to leave the room feeling rewarded.