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This report, "Top 100 FLSA Q&As", is designed to provide you with an examination of the federal FLSA overtime regulations in Q&A format, including valuable tips for bringing your workplace into compliance in an affordable manner.

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November 29, 2017
Facts or Feelings: Which Is More Important When It Comes to Pay?

Compensation is, of course, based on facts and figures. But some surprising news recently came from PayScale, Inc.: employee loyalty is driven much more by feelings than it is by facts.

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PayScale’s employee experience study and the resulting paper, The Formula for a Winning Company Culture, reveal some interesting insights into employee perception of their companies and jobs.

When it comes to employee satisfaction, results indicate that the way employees feel about the pay process at their organization, in terms of fairness and transparency, is much more impactful on their pay satisfaction—5.4 times more than how they are paid relative to the market. In turn, those perceptions play an important role in overall job satisfaction.

Employees tend to feel more satisfied at work and are more likely to remain with their employer when they both feel appreciated at work and believe their company’s future is bright, the study found.

The results demonstrate that fostering open communication with employees about their role and performance, including discussions of compensation, is critically important to the bottom line.

More/better communication leads to better outcomes

“This research aims to shed new light on employee satisfaction and intent to leave in an era where engagement is at an all-time low,” said Lydia Frank, Vice President of Content Strategy at PayScale. “We’re seeing an emerging trend across many forward-thinking companies who are investing in fostering a richer sense of value and fairness with their employees.

"Our study shows that just by having an open dialogue about the pay process and employees’ contributions at the company, employers can ultimately drive better outcomes for their businesses.”

The research found that how people are paid relative to the market has little impact on their job satisfaction or on how likely they are to remain with the company. But, how they feel about the company’s pay philosophy and process has a significant effect.

Interestingly, employees don’t seem to know whether or not they are paid fairly. Nearly 90% of the survey respondents who believed they were paid below market rate for their jobs were actually paid at market or above market. Just 11% of people who believed they are underpaid were correct about that belief.

Whether or not employees are paid fairly, their belief about it is very important. PayScale research shows that 75% of people who think they are paid at or above the market rate report being satisfied with their job. That’s in contrast with the 59% of workers who believe they are paid below market and still report job satisfaction.

Help employees feel appreciated

The way employees feel about their employer (and vice versa) is important, too. Employees who feel appreciated tend to be more satisfied in their jobs than employees who don’t. And employee perception of the company’s success seems to reduce the inclination to change employers.

To increase employee engagement based on the factors in this recent study, PayScale says there are some small changes you can make. Some of them are even without cost. Here are a few of the measures they recommend.

Find out your current level of employee engagement. PayScale’s findings indicate a decided disconnect between how employees really feel and how management believes they feel. This disconnect applies across several categories, including pay fairness and appreciation.

If you don’t have the budget to hire an outside firm to conduct an employee engagement study, design one yourself; you can find how-tos using a simple online search.

Improve your organization’s pay communication. This should start with an intentional, written compensation strategy that can be easily and clearly articulated. PayScale’s research over a number of years suggests that most companies aren’t using their compensation budgets effectively, demonstrated by the fact that very few people are satisfied with their level of pay.

But, the way employees feel about their pay is more important than the real relationship to the market. That’s why communication is so critical.

As much as you can, tell employees how you set your pay levels and what your compensation strategy looks like, and empower managers to discuss pay with employees. Naturally, you’ll want to be sure your compensation strategy is aligned with the values, culture and mission of your organization.

Place employee appreciation front and center. “Appreciation is the primary driver of employee satisfaction,” says the PayScale analysis. Are you ensuring employees know they are appreciated?

There are a variety of measures you can employ to make sure they know: spot bonuses, company trips and merit pay increases are just a few of them. Appreciation rewards don’t need to be pricey, either. Encourage line managers to speak up when they notice employees doing well—not just when they aren’t.

In the current low-unemployment environment, it’s important to do all you can to retain valued employees. PayScale reports that 56% of workers are planning to look for a new job in the next 6 months. By helping employees understand their value to the organization and to their manager, and by educating them about your pay structure, you may be in a better position to develop an engaged and loyal workforce.

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