Pay decisions rarely break down because organizations lack information. In fact, most compensation teams today are working with more data, more benchmarks, and more frequent market refreshes than ever before. That data is essential. It grounds decisions, supports fairness, and gives leaders a defensible starting point in an increasingly transparent world.
Where pay decisions unravel is not in the presence of data, but in how that data is interpreted, explained, and experienced. Pay lives at the intersection of logic and emotion. Organizations often approach it as a technical exercise, while employees experience it as something deeply personal. Pay signals worth. It signals recognition. It signals whether effort is noticed and whether contribution is valued. Our Chief People Officer at Payscale, Lexi Clarke, often refers to it as a “compensation moment.”
When those signals are not clearly translated, even well-supported pay decisions can create frustration and mistrust. The issue is not precision. It is shared meaning.
This tension between what pay is and how it feels was at the heart of my recent conversation on Comp and Coffee with Payscale customers Hannah Beaver of Trilogy Health Services and Kim O’Grady of Designer Brands. Their experiences illustrate why psychology and communication must sit alongside data and rigor if compensation decisions are going to land as intended.
Perception is not a side effect. It is the outcome.
Payscale’s 2025 Fair Pay Impact Report highlights a difficult truth. Nearly two thirds of employees who believe they are underpaid are actually paid fairly when measured against the market. Yet those beliefs still shape behavior. Employees who feel underpaid are far more likely to disengage or look for another job, regardless of whether the data supports their perception.
This is where many organizations get stuck. The numbers are sound, but the outcome is not. Pay decisions that make sense internally fail to land with employees because the emotional experience has not been considered.
Perception is not irrational. It is formed through context, communication, and trust. When those elements are missing, employees fill in the gaps themselves.
Why misalignment is so common
One of the most useful observations Hannah shared on the podcast was that misalignment around pay is not a failure. It is a signal.
Different teams speak different languages when they talk about compensation. Compensation teams focus on market positioning and internal equity. Finance looks at budgets and forecasts. Operations thinks about labor productivity and revenue. People leaders are focused on hiring, retention, and day to day staffing pressures.
Each perspective is valid. Problems arise when those perspectives are not translated into a shared understanding. Conversations slow down. Frustration builds. Decisions feel harder than they should.
Hannah described this as different dialects around pay. Everyone believes they are talking about the same thing, but they are not. The misalignment itself is often the first sign that an explanation or context is missing.
The emotional weight of pay decisions
In industries like health care, where margins are tight and the work is deeply human, the emotional impact of pay decisions is especially pronounced. Hannah spoke candidly about how leaders must consider not only whether a decision is consistent, but how it will be received.
Before implementing changes to bonuses or incentives, her team asks questions that rarely appear in spreadsheets. Will this feel fair? Will it feel abrupt? Will it feel respectful? Sometimes the right decision numerically still needs to be phased or reframed to avoid unnecessary damage to trust.
This is not about avoiding hard choices. It is about acknowledging that pay decisions land on people who bring emotion, expectation, and lived experience into every conversation.
Data builds trust only when it is shared
Both Hannah and Kim emphasized that data matters, but not in isolation. Data builds trust when it is visible and when leaders understand how it was used.
Kim described how her team uses simple, structured tools to walk leaders through pay decisions. Where does someone sit in the range. How do they compare to peers. What is the budget impact. What does performance look like over time. These frameworks do not eliminate disagreement, but they create a common starting point.
When leaders can see the same data compensation teams see, conversations shift. Pay decisions feel less arbitrary. Managers gain confidence explaining outcomes because they are grounded in evidence, not authority.
Transparency does not guarantee agreement, but it does reduce suspicion.
Managers shape the employee experience of pay
Managers sit at the most fragile point in the pay ecosystem. They are expected to explain decisions they did not design, using language they were never trained to use.
Kim shared how her organization invests in teaching managers what good and bad pay conversations look like. Not scripts, but examples. When managers default to “this is what HR gave me,” employees feel dismissed. When managers connect pay to performance, growth, and opportunity, employees feel seen, even when the outcome is disappointing.
Training managers to talk about pay is not a nice-to-have. It is one of the most direct ways organizations shape how pay is experienced.
Connecting pay to purpose without losing credibility
At Trilogy Health Services, pay is inseparable from mission. Employees are not thinking about margins or revenue when they care for residents. They are focused on people.
Hannah spoke powerfully about this reality. Pay is not the reason employees choose healthcare, but it is the reason they stay. Connecting compensation to the ability to attract and retain skilled caregivers helps employees understand why pay matters without reducing their work to numbers.
This balance is delicate. Employees do not need to be persuaded to care about the business. They need to trust that the business cares about them.
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Trust is the real measure of success
Organizations do not succeed because they pay the most. They succeed because employees trust how pay decisions are made.
That trust is built when people understand the why behind decisions, when leaders can explain them with confidence, and when data is used as a shared reference point rather than a shield.
Pay will always be complex. The numbers will always matter. But pay perception determines whether those numbers lead to engagement or erosion.
When organizations take perception seriously, invest in communication, and treat misalignment as feedback rather than failure, pay becomes what it should be. A system people may not always love, but one they understand and trust.
Listen to the full conversation with Payscale customers Hannah Beaver and Kim O’Grady on Comp and Coffee to hear these insights in their own words.
