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When It Comes to Pay, Money Can’t Buy Workers’ Satisfaction

Do higher salaries lead to more satisfied workers?

In our previous piece, we examined how market position affected workers’ pay satisfaction. Somewhat surprisingly, we found that overpaid employees, while more satisfied than underpaid employees, were  clustered around the middle values of the scale, indicating apathy or passive acceptance, rather than the higher degrees of satisfaction that one might expect.

This analysis left us with more questions. Since market position is a relative measure, being overpaid doesn’t necessarily mean making large sums of money. To address that concern, we investigated whether people with higher salaries are more satisfied than those with lower salaries.

HIGHER PAY DOESN’T MEAN HIGHER PAY SATISFACTION

We examined the salary profiles of over 26,000 workers between April and June of 2017. In addition to providing their annual compensation, they also rated their agreement with the statement “I am satisfied with my pay” on a scale from 1 to 5, where 1 represented “Strongly Disagree” and 5 represented “Strongly Agree.” We then compared these scores for six income brackets: less than $25,000; $25,000 to less than $50,000; $50,000 to less than $75,000; $75,000 to less than $100,000; $100,000 to less than $200,000; and $200,000 or more.

Do You Know What You're Worth?

As it turns out, our findings for pay satisfaction by income bracket follow a familiar pattern. While higher pay does correlate with higher pay satisfaction, there seems to be a plateau. Even in the highest income bracket, full satisfaction (a 5 on the 5-point scale) is deadlocked with the 4-out-of-5 group at 18 percent of the sample. A  3 rating, which we read as neutral or apathetic towards their current pay, is still by far the most common response, comprising 36 percent of those making more than $200,000 per year.

Getting into those top buckets seems to require some serious effort. In the top bracket 4 and 5 are tied, but in every other bracket the 4s outnumber the 5s by more than 3 to 1. In the lowest income bracket, 3s outnumber 4s by almost 5 to 1. In every income bracket over $25,000, a 3 was the most common rating, indicating widespread apathy with pay.

TO IMPROVE SATISFACTION, IMPROVE YOUR PAY PROCESS

If higher pay isn’t a cure-all for pay satisfaction among workers, what alternatives are out there to help close the gap?

PayScale research indicates that workers at companies with more transparent pay processes are more satisfied with their employers, and less likely to leave. Given this information, we would expect that workers who rate their employer as having a more transparent pay process would also have higher satisfaction with their pay; and that is exactly what we found.

Looking at the same subset of workers, grouped by their self-rated pay satisfaction score, we compared how they felt about their employers’ pay processes. They were asked to rate their agreement with the statement “How pay is determined at my company is a transparent process,” on a scale from 1 to 5, with 1 indicating “strongly disagree” and 5 indicating “strongly agree.”

As we predicted, we see that those who are least satisfied with their pay, are also those who do not perceive their employer as having a transparent pay process. Of the workers who rated their pay satisfaction as 1, 49 percent also gave their employer a 1 out of 5 for pay transparency, while only 8 percent said their employer was very transparent.

Meanwhile, of the workers who are most satisfied with their pay, 39 percent gave their employer a 5 for transparent pay processes and an additional 15 percent gave a 4 out of 5, totaling 54 percent in the top two buckets for transparent pay processes. Only 16 percent of the workers with high pay satisfaction said their employers were not transparent.

Overall, there is a clear relationship between transparent pay processes and workers’ satisfaction with their pay. Fostering open and honest communication about compensation can be a low-cost way for employers to boost worker satisfaction and engagement, leading to better business results and lower employee turnover.

Caitlin Kearney
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