Underpaid, over-titled and on the way out

2007

Spend any time browning back through the stories here on Management-Issues and one common theme that quickly emerges is the yawning gulf between what makes employees happy and what their employers and HR departments think makes them happy.

But despite the fact that HR professionals believe that retention is their top business challenge, there is further evidence that they continue to have little idea what it is that motivates staff to stay or go.

Salary.com's 2006/2007 Employee Satisfaction and Retention Survey is just the latest piece of research to highlight the disconnect between what employees value and what HR professionals perceive to be the most important factors in employee job satisfaction.

The survey, completed by U.S. 11,852 employees and 311 HR professionals, has found that employers could face a rude awakening as they dramatically underestimate levels of discontent among their staff.

In fact more than six out of 10 of the employees surveyed said they plan to look for a new job in the next three months, nearly double the proportion that employers believe are looking.

And while lower-paid employees are more likely to look for a new job than higher-paid employees, the survey still found that around half of executives were quietly getting on with the job of job hunting.

What's more, it is the most productive staff who are most at risk of leaving - people who have been in their position for between three and 10 years – whose departure would have major hard and soft cost implications.

HR professionals estimate that the hard costs to replace an employee range between 33 percent and 50 per cent of their base salary. In addition to this are soft costs such as loss of productivity and institutional knowledge, as well as new hire recruiting and training expenses.

"It's no surprise that inadequate compensation leads the list of factors that make employees want to leave a current position," said Salary.com's senior vice president, Bill Coleman.

"According to the survey, nearly 50 per cent of employees believe they are underpaid. After analysing the data, we found less than 22 percent were paid below the fair market value for their job."

One reason for employees feeling underpaid could be over-titling, Coleman suggested.

"We found that 30 percent of respondents were likely over-titled, leading many to feel underpaid when in reality an inflated job title was the real issue."

Moreover, the survey showed that more than one in six respondents were actually overpaid and a third were paid reasonably close to their fair market value.

So it could be that many employees lack insight into what represents fair pay for their job, so fuelling job search activity. Alternatively, it could be that staff feel that money isn't everything – a fact which Bill Coleman acknowledged.

"While pay is important, it isn't everything," said Coleman. "The real surprise is that employers are largely unaware of the real reasons for employee dissatisfaction beyond pay.

"This disconnect could lead organisations to focus on the wrong issues and as a result, experience high employee turnover and replacement costs."

Employees rate good relationships with colleagues, managers and – significantly – decent work-life balance as the top factors that keep them in their current jobs.

This contrasts with responses from HR professionals who still rate benefits, job commitment and culture as the leading contributors to employee retention.

The result is a perception gap can put employers at risk of losing key talent, simply because they are focusing retention efforts in the wrong places.

And while the survey found that many employees could be convinced to stay with a pay hike of some 10-15 per cent – far less than it would cost to replace a key employee – it is equally clear that HR professionals need to listen and learn if they are to stave off the retention crisis that so many of them fear.