How to handle an employer knowingly paying below market?

Question

My current employer is known to have a below average pay scale. My current salary is 5% less than my last job, and there is a mantra about the company not having enough money. Lots of money is being spent for certain equipment, and there are some very nice cars parked outside, but software development is not a priority. For my role, public institutions would pay as much as 13% more in UK, and private companies would pay 50K to 70K depending on seniority.

The impression I have is that I am getting a random 1000 GBP of raise at the end of the year, despite me having a unique role in the company and being highly requested.

So, my question is: when the employer is knowingly underpaying a critical resource, should one mention the market value or is it a taboo? Actually, is a low payscale a taboo in general for discussions?

Answer 1

"... there is a mantra about the company not having enough money."

Obviously money is a topic of discussion. They put it on the table.

Remember - the company's money problems are not your problems. YOUR money problems are your problems.

If you feel your compensation is inadequate, you have three choices:

1. Redress your compensation. This could mean non-monetary compensation, as well. Would an extra 2 weeks' vacation cover it? You can get creative, here.
2. Accept the lower rate. Remember, half of all pay is below average. (OK, below median, if you want to get technical.)
3. Change jobs. If you can't be satisfied with the compensation offered because you can get better elsewhere, then go elsewhere.

There is a popular set of co-dependent misconceptions out there: That somehow employees "owe" something to their employers, and that employers are somehow "indebted" to their employees. Neither of these are true. It sounds like your employer is doing the former. A big political push happened here in the U.S. about 18 months ago to make people think the latter was true. Both are wrong.

Employees work, and employers pay wages. When you get your paycheck, the agreement is satisfied, and concluded. There is no "running tab" on either side. When you show up for your next shift after payday, the agreement is continued.

My view is that every day you show up to work, you're convincing them to keep you employed. Every time they write your paycheck, they're convincing you to stay there.

Answer 2

So, my question is: when the employer is knowingly underpaying a critical resource, should one mention the market value or is it a taboo? Actually, is a low payscale a taboo in general for discussions?

It's not taboo, it's just a waste of time.

If the employer is knowingly underpaying, saying "Hey, you are underpaying" is not at all likely to make any difference. Worse, it could start a series of bad feelings on both sides.

If you are attempting to negotiate a raise, avoid the "you are below market" argument, since they already know this. Instead, focus on what you individually are worth to the company. Try to find a way that they can be below market for everyone except you.

If you feel that the payscale at this company outweighs the other benefits, it might be time to seek employment elsewhere. Perhaps you can find a company that isn't known to underpay, or even one that overpays.

Answer 3

My current salary is 5% less than my last job

Presumably this was not a problem for you when you accepted the job. Why is it now? If you're trying to negotiate a significant raise shortly after starting with only market rate as an argument you risk coming across as acting in bad faith.

In general companies know full well that they're paying below market rate so you're not telling them anything they don't already know. They'll either rigidly enforce low wages and won't care about the turnover or they'll reserve raises for above-average performers. They won't make an issue of the low morale and motivation this is likely to cause or the fact that they'll probably never hire high performers which have better offers.

So in short, don't bother mentioning the market rate. It won't help and can only distract from the arguments you should be giving for a raise. That discussion should focus on your past performance, not on market trends.

Answer 4

Of course you can have these discussions - at the end of the day if you feel you are being undervalued at your current role, you can either negotiate, using market rates as a useful piece of evidence, or leave to go somewhere else you will be paid at the amount you feel you deserve.

There are no general 'taboos' on this, however your employer may have their own opinions on what they like in salary negotiations - that would be up to you to find out.

Answer 5

To attack the question from a different angle, I would say the answer depends a lot on the company and people you are thinking about communicating with. If they are large enough to have a decent HR department, there is a good chance they would be well aware of talent management and also remuneration and benefits. Rem & ben strategy is a specialised area which I am not an expert on at all, but your approach in my opinion would vary a lot depending on the size and also maturity (in terms of awareness) around that and also talent management.

If the company is small or immature, they may not realise the implications of underpaying. If they are not, then there would be many people in management and HR who are aware of the issue and may be working towards a solution.

If you do decide to go down the path of raising the issue, I would focus on the value you bring first and foremost with the comparison to market as second. Perhaps check out the idea of "BATNA" as well, which in this instance would mean if you are trying to leverage a raise, then your best chance is to have the discussion when you have a higher paying alternative offer. When you have a niche skillset / product knowledge this is increased.

Take note though, how you go about this process could be seen as aggressive and depend on your style and your audience so proceed with caution!