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Is Anyone Actually Happy with Their Paycheck?

Research comparing pay satisfaction for overpaid and underpaid workers.

Whether it’s a professional athlete, a boss, or a coworker, we often look around and see people that we think are being overpaid. We assume they must be happily floating along on all that extra cash—while we toil away for less than we are worth, becoming increasingly dissatisfied. But are people who get more than the going rate actually more satisfied with their pay than those who are underpaid? Our research suggests they are not.

ON PAY, A SATISFIED EMPLOYEE IS A RARE FIND

Between April and June of 2017, over 26,000 respondents to the PayScale salary survey rated their agreement with the statement “I am satisfied with my pay” on as scale from 1 to 5, with 1 indicating “Strongly Disagree” and 5 indicating “Strongly Agree.” We also asked respondents for their current annual compensation, their location, skills, education and other details that could affect their compensation and market position. Using the Payscale Index Model, we projected whether respondents were overpaid, underpaid, or paid according to the market rate. We then compared the self-reported pay satisfaction scores for the overpaid and underpaid groups.


Unsurprisingly, underpaid workers are the least satisfied with their pay, and overwhelmingly so: 45 percent rated their satisfaction a 1 out of 5 for pay satisfaction, with an additional 26 percent ranking a 2 out of 5. The top two options for satisfaction represent a mere 6 percent of all underpaid workers, with less than 2 percent ranking their pay satisfaction as 5 out of 5. But contrary to what one might expect, overpaid workers aren’t satisfied either.

UNDERPAID WORKERS AREN’T SATISFIED, BUT OVERPAID WORKERS AREN’T MUCH HAPPIER

Only 6 percent of overpaid workers gave themselves a 5 out of 5 for satisfaction, while 19 percent rated a 1 out of 5. The distribution of responses has clearly shifted to the right for the overpaid group, but it remains clustered around the middle, indicating widespread neutral or apathetic feelings among those who should be most satisfied with their earnings (see graphic). Indeed, while respondents who are underpaid were most likely to rank their pay satisfaction as a 1, those who are overpaid are most likely to rank their satisfaction as a 3 out of 5, with 39 percent falling into that group. What does this tell us? Being overpaid isn’t enough to keep employees satisfied.

Do You Know What You're Worth?

TO INCREASE PAY SATISFACTION, MAKE SURE EMPLOYEES UNDERSTAND THE PAY PROCESS

This research shows that relatively high pay does not necessarily make employees happy with how much they take home. It also indicates that there are likely other factors related to compensation that are important to workers’ satisfaction, aside from just the number on their paycheck.

A recent Payscale analysis shows that the majority of workers believe that they are being underpaid, even when they are paid above the market rate. We believe this disconnect may stem from the lack of transparency surrounding compensation in many organizations. That same lack of transparency may also be contributing to the lack of satisfaction with pay, as people are unable to gauge whether they are being paid fairly relative to the market rate, and may feel disadvantaged or confused in compensation negotiations.

Additional Payscale analysis suggests that increased transparency around how organizations evaluate pay leads to higher satisfaction with pay and with the organization overall. For organizations seeking to boost employee satisfaction, creating a culture of openness and honesty around compensation could have as much of an impact as raising their employees’ salaries above the market rate.

But does this pattern hold true across different income brackets? In our next installment, we continue to examine the effect of pay on pay satisfaction.

Caitlin Kearney
Read more from Caitlin

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