Compversation #31 - Will Employees Ever Be Satisfied?

Throughout my career as a compensation and benefits leader, equity has always been my guiding principle. 

I’ve always cared deeply about offering employees the fairest possible pay. That hasn’t always been easy. As a junior HR professional, for example, you don’t always have the room to manoeuvre you’d like. 

But sometimes, you do succeed in securing a package or a pay rise that places an employee above the market rate for their role. When this happens, you expect a very positive reaction — perhaps even a thank you. 

But often, you find that the employee (who has every reason to be pleased) is still dissatisfied. 

This can be a hard reality to swallow when you’re starting out in HR. But it’s true: even the fairest, most generous compensation packages don’t guarantee satisfaction. 

For example, I remember one employee who was paid above market for his role, yet frequently complained about his pay. I eventually discovered the real reason: he was upset that he earned less than his wife. 

That’s when I realised I was fighting a losing battle. I had no control over the dynamics of this couple’s relationship — or the gendered social expectation that a wife shouldn’t outearn her husband. 

Recently, I came across a fascinating study that shows that this sort of situation is far from anecdotal — and that even a truly equitable pay policy can’t guarantee satisfaction for every employee. 

Perception vs. reality

Almost half of employees who are paid above market believe they are paid below market — only 9% are aware of their actual positioning. 

Among those paid at market rate, only 32% know it — while 63% believe they are being underpaid. The point is, we have a tendency to underestimate our own pay relative to the average. 

That’s the conclusion of Payscale’s 2025 Fair Pay Impact Report. 

Worse still, this perception gap has widened since 2021. Four years ago, 49% of employees who believed they were being paid below market actually were — compared with just 32% today. 

And that’s in spite of more favourable economic conditions: salaries have been rising faster than inflation since 2023.

The report doesn’t really provide an explanation for this widespread misperception, but it does highlight the consequences for employee engagement. When people believe they’re not being compensated fairly, they’re more likely to want to change roles or leave the company altogether.

The reality is that how we perceive pay is a complex process. It involves comparing ourselves to others using incomplete information, vague impressions and often arbitrary criteria. 

For example, I remember one employee who felt disappointed to be earning less than the people she’d studied with at university. 

Except, she was working for a start-up, while they were at large consulting firms. This employee genuinely enjoyed start-up life… until it came to talking money with former classmates. 

This also makes me think of another employee, who was convinced they worked harder and performed better than their colleagues, and should therefore be paid at the top of the range for their role — even though this wasn’t really the case. 

The fact is, our perceptions of ourselves are rarely accurate. And trying to satisfy expectations based on these perceptions is often counterproductive.

Is the quest for satisfaction doomed from the start?

Even if you’re the most equitable employer in the world, there are certain challenges you simply won’t be able to overcome. One of them is managing your team’s perceptions, which may or may not be founded in reality. 

That’s especially true because there’s no one, universal definition of equity. The many ethical dilemmas we face every day in compensation and benefits are proof of that. For example, should location be taken into account when setting pay? 

Fairness is never a given: it’s something we’re constantly striving for. Our role as compensation and benefits professionals is to define what fairness means for our organisation, and to decide which criteria matter most — in a way that’s consistent with the company’s values. 

Naturally, employees don’t all see things the same way. 

For example, two colleagues in roles of equal value may be paid differently due to differences in experience or performance, which may both be assessed differently from one organisation to another. One company may choose to reward experience, while another places more weight on qualifications. 

This is a never-ending debate, especially when people have a tendency to confuse equity with equality: paying people differently doesn’t necessarily mean the salary framework is unfair. 

That’s why it’s important to think carefully about the success metrics you set when you’re designing your compensation policy: if your goal is to satisfy everyone, you’re setting yourself up for near-certain failure.

After all, pay is an emotional topic, and it’s impossible for compensation leaders to fully control this side of things. 

Defining the rules of the game

A more effective strategy, then, is to focus on the rational side of things. 

Rather than trying to satisfy everyone, the goal is to ensure each employee understands the ‘why’ behind their compensation. 

Transparency can make a real difference here — and I’m not necessarily talking about full salary transparency, but at least transparency around how pay decisions are made. 

When the rules of the game are clear, it becomes possible to counter some of the effects of pay dissatisfaction. 

That’s exactly what Payscale’s report shows: the more transparent companies are, the less likely employees are to want to leave. Employees who work in very opaque organisations are 142% more likely to look for a job elsewhere, while those who work for transparent employers are 60% more likely to stay. 

This shifts the objective: instead of chasing satisfaction at all costs, the focus is on the fairness of the pay-setting process — and on being as transparent as possible about it. 

With this goal in mind, compensation and benefits teams are less focused on numbers and more on change management and communication. A clear explanation of a company’s compensation policy should involve three things:

• The company’s positioning relative to the market
• How each individual employee fits within the company’s pay structure
• Where each person sits in comparison to colleagues in roles of equal value

By concentrating on the fairness of the process, we shift the conversation away from the individual level towards a broader, more collective one. In other words: 

‘These are the rules of the game: this is how pay works in our organisation. Once that’s clearly understood, we can discuss individual cases within that framework.’

Only by starting with the bigger picture before zooming in on individual cases can we escape from the psychological and societal biases that influence employees’ feelings about their pay.  

And, paradoxically, that’s also how we can start to tackle the thorny issue of satisfaction. 

For a long time, transparency was thought to decrease employee satisfaction due to the concept of ‘double demotivation’. But in reality, we’re seeing the opposite: transparency tends to improve satisfaction by giving employees realistic benchmarks to compare themselves against. 

According to a recent study, employees inevitably form beliefs about how much their colleagues earn. These assumptions are often based on unfounded rumours, outward signs of wealth, or inaccurate public salary data. And they only serve to increase dissatisfaction. 

When employees have access to real figures instead (in this study, the company’s median salary and the CEO’s pay), satisfaction levels increase. 

Another study published last August by Cambridge University Press, entitled ‘Why do you pay me this way?’ shows that understanding the intent behind pay decisions can also increase employee satisfaction — provided those intentions are perceived as being in employees’ favour. 

The fact is, satisfying every employee is an unattainable goal that HR teams shouldn’t waste time chasing. But education and transparency can go a long way towards improving perceived equity — and, in turn, employee engagement. 

I’d be delighted to discuss this further if you have thoughts on the topic!

To continue the conversation 

Here’s some reading to keep the conversation going on this subject. If you’ve come across any interesting reads, feel free to send them my way!

What’s So Bad About Being Average? — Josh Gressel, PhD, Psychology Today

An interesting article that explains why almost everyone thinks they’re better than almost everyone else.